U.S. Healthcare Spending Surge Expected in Next Decade

February 26, 2008

U.S. health-care spending will devour an expanding share of the U.S. economy during the next decade, almost doubling to about $4.3 trillion in 2017, government officials forecast Tuesday.

Economists at the U.S. government’s Centers for Medicare and Medicaid Services, known as CMS, forecast that health-care spending will account for 19.5 percent of the U.S. gross domestic product by 2017, up from 16.3 percent in 2007.

A key factor in the next decade will be the entry in 2011 of the leading edge of the post-World War baby boom generation into Medicare, the federal health insurance program for people 65 and up, CMS economist Sean Keehan said.

The projections come as runaway health-care spending and lack of medical coverage for millions of Americans have emerged as central issues in this year’s U.S. presidential campaign. An estimated 47 million people in a country of 300 million have no health insurance, either private or through the government.

The report pegged U.S. health-care spending in 2007 at $2.2 trillion, and forecast that this spending would grow annually by about 6.7 percent through 2017.

That would far outpace GDP growth, expected to rise by 4.7 percent annually, and inflation, expected to rise 2.4 percent annually, the report said. Gross domestic product is the sum of all goods and services produced within U.S. borders.

Medicare spending by 2017 is expected to reach $884 billion — more than a fifth of all national health-care spending. This compares to $427 billion in 2007, according to the report.

Medicaid, another large entitlement program, also is seen expanding at a higher rate than overall health spending.

The report, published in the journal Health Affairs, sees Medicaid, a federal-state program that helps pay health expenses for the poor and others, growing at an average of 7.9 percent annually, reaching $717 billion by 2017. That would account for about 17 percent of U.S. health-care spending.

“The cost of health care continues to be a real and pressing concern,” CMS Acting Administrator Kerry Weems said in a statement. “Making sure we are paying for high quality health-care services, not just the number of services provided, is just one of the most critical issues facing the American public and the federal government now and in the future.”

After cresting in 2009 at 6.6 percent, private health-care spending growth is projected to diminish a bit to 5.9 percent more per year through 2017, the economists forecast.

Spending on prescription drugs will more than double to about $516 billion by 2017, while hospital spending will almost double to about $1.3 trillion in 2017, they projected.

A slowdown in the growth in private health-care spending in the next decade is projected to be offset by accelerating growth in public spending in part because of the baby boomers enrolling in Medicare, according to the report.

(Editing by Julie Steenhuysen and Bill Trott)

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