National spending on health care will rise faster than the country's gross domestic product (GDP) over the next 10 years, driven by key provisions in the Affordable Care Act, according to a new CMS report that projects spending statistics through 2020. The result will be "significantly" increased demand for prescription drugs and physician and clinical services, the report says.
Healthcare spending is projected to grow at an average rate of 5.8% per year over the next decade, while GDP is projected to grow at just 4.7% per year. The result is that healthcare will grow from being 17.6% of GDP in 2010 to 19.8% of GDP in 2020, says Sean Keehan, an economist in the Office of the Actuary at CMS.
Here's the numbers on projected growth in physician payments:
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Medicare spending on physician payments will grow by 4% per year, assuming that the sustainable growth rate (SGR) formula remains intact and goes into effect every year. NOTE: This refers to growth in the amount Medicare spends on physician payments, not the actual payment rate to physicians, Keehan says.
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Medicare spending on physician payments would grow by 6.9% if SGR was repealed and payment rates went up based on the Medicare Economic Index (MEI), which has long been a suggestion of the Medicare Payment Advisory Commission (MedPAC).
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Private insurance spending on physician payments will grow by 4.7% per year, a low figure because Medicare enrollment will rise much faster than enrollment in private plans, says Gigi Cuckler, also an economist in CMS's Office of the Actuary.
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When you combine Medicare and private payers, the total aggregate growth in spending on physician payment is 5% annually.
Overall: "Robust growth in Medicare enrollment, expanded Medicaid coverage and premium and cost-sharing subsidies for exchange plans are projected to increase the federal government share of health spending from 27% in 2009 to 31% by 2020," according the executive summary.