National health spending reached $3.4 trillion last year, and it's about to grow at a faster rate

National health spending reached $3.4 trillion last year, and it's about to grow at a faster rate
National health spending reached $3.4 trillion last year, and it's about to grow at a faster rate

After a brief slowdown last year, national health spending is expected to accelerate and increase by an average of 5.6 percent annually from 2016 through 2025, a new analysis shows.

That pace will lead to $1 out of every $5 spent in the United States going toward health care by 2025, the report by federal health analysts says. The pace will run ahead of the national inflation rate for all goods and services by an average of 1.2 percentage points, according to the report.

The analysis does not factor in possible effects of a planned repeal of the Affordable Care Act, which the Trump administration intends to replace with new legislation.

The report by the Office of the Actuary of the federal Centers for Medicare and Medicaid Services was published online Wednesday by the journal Health Affairs.

The authors estimate that national health spending grew by just 4.8 percent in 2016 — a full percentage point less than the rate seen in 2015.

The drop was the result of a sharp slowdown in the growth of spending on Medicaid, the government-run insurance coverage system for primarily poor people, and a deceleration in the growth of spending on prescription drugs.

Still, an estimated $3.4 trillion was spent on health services and goods last year.

"We expect health spending growth to gradually increase as a result of fast projected growth in medical prices that is only partially offset by slower projected growth in the use and intensity of medical goods and services," said Sean Keehan, an author of the study.

This year, overall health spending is projected to increase by 5.4 percent. It will be driven primarily by increased spending on beneficiaries enrolled in Medicare, the federal coverage system for primarily senior citizens, as well as increased premiums for Obamacare insurance plans.

In 2018 and 2019, health spending growth is expected to average 5.9 percent, "driven primarily by faster growth in Medicare and Medicaid," according to the authors.

Then, from 2020 through 2025, health spending is projected to grow by an average rate of 5.8 percent.

During that time frame, Medicare spending is projected to grow at an average rate of 7.6 percent due to large increases in enrollment from baby boomers, as well as from the aging of existing Medicare beneficiaries, according to the projections.

CNBC

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