U.S. health spending is expected to reach nearly $4.6 trillion by 2019, growing at an average annual rate over the next decade of 6.3%, as opposed to a 6.1% rate anticipated before reform, according to economists at the Centers for Medicare and Medicaid Services.

By 2019, health care is predicted to account for nearly one of every five U.S. dollars spent or about 19.6% of the gross domestic product, 0.3 percentage points higher than projected previously.

"In the aggregate, it appears that the Affordable Care Act will have a moderate effect on health spending growth rates and the health care share of the economy," says Andrea Sisko, lead author of the study and economist at CMS.

At the same time, she explains that "differences in spending patterns, by year and by payer, reflect reform’s many major changes to health care coverage and financing."

In 2010, CMS analysts project health spending to reach $2.6 trillion and account for 17.5% of the GDP, up 0.2 percentage point from pre-reform approximations.

This growth is driven primarily by the postponement of cuts to Medicare physician payments and legislative changes to CORBA premium subsidies, say CMS experts.

However, in 2011, public and private health spending is estimated to grow more slowly as Medicare physician payment rates are lessened (including a 23% reduction in December of 2010) and COBRA premium subsidies expire.

When an estimated 15.8 million people gain private health insurance coverage through Health Insurance Exchange plans in 2014, private health insurance spending is, predictably, expected to climb steeply. Spending growth is prophesized to be 12.8%, more than double what CMS projected in February.

This expanded coverage means overall spending is expected to increase by 9.2%, much higher than the 6.6% rate proffered pre-reform.

Public spending is expected to increase by 9.7% in 2014, while private spending is anticipated to increase by 8.6%. By 2019, private health insurance spending is predicted to account for about 32% of national health spending.

With more people insured in 2014, out-of-pocket spending is projected to decline by 1.1% instead of rising 6.4% as calculated before health care reform.

Before that time, out-of-pocket spending is predicted to slow for 2010 as more people retain private health insurance through subsidized COBRA coverage (1.1 percentage points slower than previously expected). In 2011, as the subsidies expire, out-of-pocket spending is predicted to grow at a slightly faster rate of 3.1%.

Even though out-of-pocket spending is anticipated to grow slower than previously thought until 2017, when the excise tax on high-cost employer sponsored plans is exacted in 2018, out-of-pocket spending is projected to grow at a rate of 9.6%, four percentage points faster than what CMS projected in February.

Overall, from 2015 to 2019, national health expenditures are expected to grow at an average annual rate of 6.7%, slightly less than the pre-reform projection of 6.8%.

CMS economists tie this to a reduction in Medicare spending growth, which is projected to be 1.4 percentage points lower than pre-reform predictions.

In total government expense, CMS analysts estimate that the spending brought about by new and expanded administrative roles for the federal and state governments under health reform (inclusive of HHS, state exchanges—startup and operating expenses—and Medicaid) will amount to $71.1 billion. 

The administrative function for health reform at HHS is projected to cost $2.4 billion between 2010 and 2019. Separate federal and state outlays to create and operate the Health Insurance Exchanges are estimated to cost $37.7 billion.

Medicaid administration costs at the state and federal level are predicted to increase by $31 billion over the same period.

PPACA’s aim for universal insurance will come near fruition by 2019 when CMS estimates that nearly 93% of people will be insured, a level that is roughly 10 percentage points higher than the share of the population that was expected to be insured without passage of national reform.

More than half of the projected 32.5 million newly insured people are expected to gain coverage through Medicaid.

Enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) is expected to increase by 21.8 million in 2014 to 85.2 million people. Significantly, by 2019, Medicaid and CHIP expenditures are estimated to represent nearly 20% of national health spending, up from nearly 18% in the pre-reform estimate.  

Expanded Medicaid eligibility beginning in 2014 is expected to augment spending by 17.4% in 2014 to $634.1 billion, 11.1 percentage points faster than projected prior to reform.

PPACA isn’t the only piece of legislation expected to change health insurance spending, COBRA-related changes are projected to result in an additional 1.6 million insured and an additional $15.4 billion in spending by private health insurance in 2010.

Therefore, private health insurance spending is predicted to grow 4.3% for 2010, higher than the 2.5% projected in February.

CMS predicts that the expiration of subsidized COBRA coverage and a decline in private health insurance enrollment and spending growth due to high unemployment will bring down the rate of growth in private health insurance spending in 2011. Spending is expected to rise just 2.2% in 2011, slightly more than half of what was projected in February.

Finally, Medicare provisions in the health care reform law are expected to result, on net, in much slower Medicare spending growth from 2009 to 2019. In particular, average annual Medicare spending growth is projected to be 1.4 percentage points slower than previously predicted for 2010 through 2019.

This is attributable to cuts in Medicare payments to providers and managed care plans intended to gradually close the “doughnut hole” or the coverage gap in the Part D prescription drug benefit.

Follow EBN on: Twitter | Facebook | LinkedIn | Podcasts