U.S. to Pay Bigger Share of Rising Cost of Health Care

Report finds expenditure reaching $4.6 trillion by 2020, and taxpayers will pay for nearly half

Steven Reinberg

Steven Reinberg

Published on July 28, 2011

THURSDAY, July 28, 2011 (HealthDay News) -- The rate of growth in U.S. health care spending is expected to pick up speed so that the nation will shell out $4.6 trillion for services by 2020, a new report finds.

And an increasing amount of that bill -- almost half -- will be paid for by government.

Growth in health care spending dipped to a "historic low" of 3.9 percent in 2010 because of the recession, the experts said. But the new report, from Medicare's Office of the Actuary, projects that by 2014 -- when many provisions of the new health care reform law kick in -- growth in spending will accelerate to 8.3 percent.

That rate of growth outstrips any projected increase in the United States' gross domestic product, the experts noted.

The rise in health care costs is due to several factors. These include a growing and aging population, more seniors enrolling in Medicare, and the expansion of Americans' access to Medicaid and private insurance under the new health care reform law.

"We have projected health care costs to grow at an average rate of 5.8 percent a year for 2010 to 2020," lead report author Sean P. Keehan, an economist in the Office of the Actuary at the U.S. Centers for Medicare and Medicaid Services, said during a Wednesday afternoon press conference.

The report also contends that health care reform, which should allow an estimated 30 million Americans to gain access to coverage, will only contribute modestly to the upsurge in spending. According to Keehan, without the Affordable Care Act the rate of growth for health care costs would have been 5.7 percent a year, so that "the Affordable Care Act only adds 0.1 percent to growth."

Still, changes brought about by health care reform, are "expected to increase the demand for health care significantly, especially in the sectors of prescription drugs and clinical and physician services," Keehan noted.

And there's no denying that taxpayers will shoulder more of the costs of health care in the United States over the coming decade.

"Robust growth in Medicare enrollment, expanded Medicare coverage, and premium and cost-sharing subsidies for [health care insurance] exchange plans are projected to increase the federal government share of health spending from 27 percent in 2009 to 31 percent by 2020," the report's authors concluded. Add in monies spent by state and local government, and the public's share of the tab for health care expenditure rises to just under 50 percent, according to the report.

As government spending increases, so will costs to individuals, the report notes. "Households and private businesses are anticipated to pay for a smaller portion of the nation's health bill than they would have without the Affordable Care Act, but still will face a growing burden on their respective limited resources," the authors wrote.

"As health care spending goes up, each person's expenses on health care is also expected to go up," Keehan concurred.

Health care costs are also expected to rise faster than the U.S. economy will grow, the researchers warned. Gross domestic product (GDP) -- a measure of overall economic growth -- is expected to rise by only 4.7 percent a year over the next decade, Keehan said. Crunching the numbers, "that would cause an increase in health care's share of GDP from 17.6 percent in 2010 to 19.8 percent in 2020," he explained.

Still, Richard Hamburg, deputy director of the non-partisan advocacy group Trust for America's Health, said he believes that the rise in expenditure will be an important investment in a healthier population.

"From our perspective, the great new investment in the Affordable Care Act is the attention to prevention and public health," he said. "Over time, investing in wellness and prevention programs will save money down the line; and while we save lives we will decrease the incidence of chronic diseases and save significant costs."

"People will live longer, more productive lives," Hamburg said.

The report was published in the August issue of Health Affairs.

More information

To see the full report, visit Health Affairs.

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