Medicare Actuaries: U.S. Healthcare Spending to Soar to $5.631 Trillion and 20.1 Percent of GDP in 2025

Mark Hagland | Healthcare Informatics | July 18, 2016

In their July issue, the editors of Health Affairs published the latest estimates of U.S. healthcare spending, developed and revealed by the actuaries of the federal Medicare program. In an article entitled “National Health Expenditure Projections, 2015-25: Economy, Prices, and Aging Expected To Shape Spending and Enrollment,” the authors, predicted that the percentage of the gross domestic product (GDP) spent on healthcare every year across the U.S. healthcare system would grow from 17.5 percent in 2014 to 20.1 percent in 2025 with total spending rising from $3.3013 trillion in 2014 to $5.631 trillion in 2025. That figure adds to the estimates that the Medicare actuaries had predicted in October 2014; back then, the actuaries predicted that annual healthcare spending would reach $5.1588 trillion in 2023, and 19.3 percent of the nation’s gross domestic product.

As the actuaries noted in their report, “Following the initial effects of the Affordable Care Act (ACA) on health care spending and insurance coverage, increases in economic growth, faster growth in medical prices, and population aging are expected to be the primary drivers of national health spending and coverage trends over the next decade. Growth in nominal (not inflation adjusted) national health expenditures is projected to average 5.8 percent for the period 2015–25, outpacing growth in the gross domestic product (GDP) by 1.3 percentage points. As a result, the health share of the economy is expected to climb from 17.5 percent in 2014 to 20.1 percent in 2025.” Thus, though 5.8 percent overall U.S. healthcare inflation is not high compared to historical healthcare inflation rates (during 2007-2009, the rate of inflation was nearly 8 percent), it is higher than it was in the first few years following the passage of the ACA, when passage of that legislation measurably lowered the curve of healthcare inflation...