Government Report: Health-Care Costs Will Soar Over the Next Decade

In a newly published report, federal researchers claim that overall health-care costs in the United States are expected to grow significantly during the next 10 years, reaching nearly 20 percent of the nation’s gross domestic product (GDP) by 2016. The report was conducted by economists at the National Health Statistics Group (NHSG), which is part of the Centers for Medicare and Medicaid Services, and was published online by the journal Health Affairs.

According to the study, total spending on health care is projected to reach $4.1 trillion by 2016; estimates for 2006 are at $2.1 trillion. Since 2001, there has been a slight decelerating trend in health-care spending, attributable in part to slow growth in “volume and intensity” of medical services. In fact, Medicaid, thanks in large part to the Part D prescription benefit, is expecting a slight decrease in overall spending in 2006 the first time that’s ever happened.

However, the recent trend is expected to reverse beginning next year. One reason for that is that the institution of Part D last year brought with it certain one-time cost savings, which won’t continue. In addition, the overall economic growth of the country tends to feed a surge in personal-health-care (PHC) spending.

“The lagged impact of recent stronger economic growth is also projected to produce a mild acceleration in the growth of private PHC spending through 2009,” the authors note. “Real per capita growth in private PHC spending is expected to peak in 2009, followed by a gradual slowdown through 2016. Within our model, trends in aggregate personal disposable income generally feed through the health sector with a lag of one to five years.”

The authors conclude their report with a stern warning: “Despite rising costs, consumers continue to purchase costly existing and new health care technologies. At the same time, Medicare is expanding, and we are moving incrementally away from traditional sources of insurance, such as employer-based coverage, to a system comprising more federal and state government-provided health care (45.4 percent in 2005, projected to reach 48.7 percent by 2016).

“The decade-long projection detailed here expects that nearly twenty cents of every dollar spent will be devoted to health by 2016. Such a projection indicates that our society will continue to address the key issues regarding the potential to sustain our current path, the possibility that we will have to make important sacrifices to pay for health care, and the constant assessment of the value we associate with our health care investment.”

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