Healthcare Spending is on the Rise

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Key takeaways:

  • Between 2017 and 2027, healthcare spending is expected to increase by $6 trillion. During this period, spending is anticipated to rise from 17.9% in 2017 to 19.4% of GDP.
  • Government spending on healthcare is projected to reach 47% of total healthcare spending by 2027.
  • Hospital spending growth is anticipated to grow at an average of 5.6% through 2027.
  • Clinician services are also expected to grow by 5.4% during the same period1.

Over the course of the past few years, a strong economy coupled with high levels of healthcare spending have dominated news headlines. And while this news may be nothing new, a recent report published by Health Affairs has shed light on just how significant the anticipated growth in healthcare spending is. According to the survey, national health spending is expected to outpace growth in GDP by 0.8% by the year 2027. Subsequently, estimates project that healthcare’s share of the GDP will increase by 1.5% to reach 19.4% in the coming decade. As the rising costs of care continue to be a major pain point for many organizations nationwide, the projections published by Health Affairs offer insight into what may be to come for hospital leaders. Additional projections include:

  • Hospital spending in 2019 is projected to increase from 4.4% in 2018 to 5.1%.
  • Over the course of the next 8 years, health spending growth is expected to average 5.7%. Medicare is expected to be the most affected out of all payers as wages and salaries increase as healthcare labor markets tighten.
  • While Medicaid spending is projected to average 5.5% from 2020 through 2027, private spending growth is expected to average 4.8%. The difference in the projected growth rates between government and private health spending is largely due to the fact that baby-boomers are anticipated to transition from the private market to Medicare health plans.
  • Prices are anticipated to continue to increase leading up to 2027. As demand for clinicians is expected to increase in accordance with an aging baby boomer generation, spending on clinical services is projected to grow at an average of 5.4% annually.
  • Health insurance enrollment is expected to keep pace with population growth, with a minor decrease from 91% in 2017 to 89.7% in 2027.
  • Out-of-pocket costs are also projected to increase at an average of 4.8% through 2027. However, out-of-pocket costs as a percent of total spending is expected to decrease from 10.5% in 2017 to 9.8% in 2027.
  • While drug spending growth is expected to be 4.6% in 2019, projections anticipate that it is expected to average 6.1% in the years leading up to 20271.

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Sources:

Commins, J. (February 20th, 2019) Health Spending Growth To Average 5.5% Annually Through 2027

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