CMS: Healthcare spending to outpace GDP growth

(Reuters) — Healthcare costs in the U.S. are expected to grow at a faster clip over the next decade and overall health spending growth will outpace that of the gross domestic product, according to the Centers for Medicare & Medicaid Services.

The aging of the enormous Baby Boom generation and overall economic inflation are prime contributors to the projected increase in healthcare spending, CMS said in the report.

Overall healthcare spending will comprise 19.9% of the economy in 2025, up from 17.8% in 2015, the report forecast. The pace of growth in U.S. spending on health is expected to pick up in 2017, increasing 5.4% over 2016. That compares with an estimated 4.8% spending uptick in 2016. Spending for 2016 was estimated at $3.4 trillion.

When the final numbers are in, the growth in prescription drug spending for 2016 is expected to have slowed to 5% from 9% in 2015. However, CMS has forecast growth of 6.4% per year between 2017 and 2025, in part because of spending on expensive newer specialty drugs, such as for cancer and multiple sclerosis.

The projections for 2016 to 2025 were made assuming that the Affordable Care Act, former President Barack Obama’s signature healthcare law widely known as Obamacare, would remain intact. It does not take into account likely changes to the law.

The Republican-led Congress and the president have vowed to repeal and replace the ACA, but a viable replacement plan has yet to emerge.

The president signed an executive order on his first day in office last month to freeze regulations and enable government agencies to take other steps to weaken Obamacare.

The ACA expanded Medicaid, the government health insurance program for the poor, in more than 30 states and set up private healthcare exchanges that enabled previously uninsured people to buy health insurance. After high enrollment between 2014 and 2015, Medicaid and private health insurance spending were expected to have slowed in 2016.

But spending on Medicare, the government health insurance program for the elderly, is expected to grow between 2017 and 2025 as a larger elderly population requires more medical services.

The overall insured rate of the population is expected to reach 91.5% in 2025, up from 90.9% in 2015, the report said.

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