U.S. Health-Care Costs to Top $4 Trillion By 2016

That's a doubling of expenditure in 10 years, according to a new report

By Amanda Gardner
HealthDay Reporter

WEDNESDAY, Feb. 21 (HealthDay News) -- Federal forecasters predict that U.S. health-care spending will double by 2016, to $4.1 trillion per year.

That's one-fifth of the nation's gross domestic product (GDP).

Health spending in 2006 was projected at $2.1 trillion, or 16 percent of the GDP.

"There is a relatively modest and stable projection for 2006 to 2016, with an average growth rate of 6.9 percent," John Poisal, deputy director of the National Health Statistics Group at the Centers for Medicare and Medicaid Services (CMS), said during a Tuesday teleconference. He noted that with projected growth rates falling slightly in 2006 and 2007, "that would result in five consecutive years of slowing growth."

But the projected decelerations didn't impress outside experts.

"We haven't solved the health-care cost problem," stated Karen Davis, president of the Commonwealth Fund. "There was a lot of feeling when the 2006 numbers came out and we were growing at about 7 percent a year, that maybe it wasn't a continuing problem. But, I think even growing at 7 percent a year you see that by 2016 we are going to be spending 20 percent of the nation's economy on health care. I think it says we've got to get serious about doing something that really improves the efficiency of the health-care system and not just shifting money."

Here are other highlights from the report, prepared by CMS actuaries and Medicaid Services and appearing in today's online edition of Health Affairs:

• Medicaid spending is expected to reach $313.5 billion in 2006, about the same as in 2005.
• Medicaid drug spending is projected to drop 36 percent between 2005 and 2006 as low-income recipients who also are eligible for Medicare start receiving drug coverage through the new Part D program.
• With the addition of Part D, total Medicare spending growth is expected to reach $417.6 billion in 2006, up from $342 billion the year before. Medicare spending growth is expected to slow to 6.5 percent in 2007, partly due to legislated cuts in payments to managed-care plans and to physicians. By 2016, Medicare spending is expected to more than double, reaching $862.7 billion.
• U.S. prescription drug spending should reach $497.5 billion by 2016, more than double the expected level for 2006. Prescription drug spending will grow at an average annual rate of 8.6 percent until 2016.
• The cost of hospital care is expected to climb to more than $1.2 trillion by 2016, vs. $651.8 billion expected for 2006. The growth rate for hospital spending is expected to slow, from 7.9 percent in 2005 to 6.6 percent in 2006.
• In 2006, consumers are expected to spend slightly less than 1 percent more in out-of-pocket ($250.6 billion) health-care costs. The total spent will reach $440.8 billion by 2016, however. In 2005, an individual spent an average of $850.02 on health care and in 2006 they are projected to spend $846.50. In 2016, the average spent will be $1,405.73, although that number is not adjusted for inflation, officials said.
• Private health insurance premiums are expected to grow 4.4 percent in 2006, down from a high of 11 percent in 2002.
• Growth in total physician and clinical spending is expected to slow from 7 percent in 2005, to 6.1 percent in 2006.
• Growth in nursing home spending is also expected to slow, from 6 percent in 2005 to 3.4 percent in 2006, largely as a result of slowing Medicaid and Medicare spending.
• Home health spending is likely to rise 1.4 percentage points to 12.5 percent in 2006, or $53.4 billion. This would make it the fastest growing area of health care.

Many of the changes reflect cost shifting, Davis said.

"They're trying to deflect costs onto other parties," she said. "What we really need is a transformation of the health-care system that gives us value for the money we're spending. We clearly have to do something about the underlying rising health costs that affect everyone."

More information

There's more on health-care costs at the National Coalition on Health Care.

SOURCES: Karen Davis, Ph.D., president, Commonwealth Fund, New York City; Feb. 20, 2007, teleconference with John Poisal, deputy director, National Health Statistics Group, CMS; Feb. 21, 2007, Health Affairs online