Study: Health Care Spending Will Continue Rising, but Modestly

BY Betty Ann Bowser  September 9, 2010 at 5:00 PM EDT

In a new report that’s sure to provide fresh ammunition to both sides of the health reform debate, a government estimate released today finds that the new health reform law will not curb the rising costs of care once it takes effect but will not substantially raise them either.

The report – published online Thursday in the journal Health Affairs by Medicare’s Office of the Actuary – found that health care spending in the United States will make up nearly 20 percent of the economy by 2019. CMS economists predicted that nearly one of every five dollars of the nation’s GDP will be spent on health care by then.

The biggest increase will come in 2014, the report said, when major provisions of the new health care reform law take effect. Health spending will jump 9.6 percent that year according to the analysis.

But that same year, spending on private insurance is expected to go up 12.8 percent as millions of previously uninsured Americans gain coverage. Most of those people will be able to buy insurance by qualifying for government subsidies under the Affordable Care Act passed by Congress earlier this year.

More than 32 million people will get new coverage under the law, according to the estimate.

Andrea Sisko, lead author of the CMS actuary report said the new law “in the aggregate” will have a “moderate effect on health spending growth rates and the health care share of the economy.”

According to the actuaries, Americans will spend an average of $13,652 per person a year on health care in 2019. Without the health care reform law, they said, about $13,387 would have been spent per person. Overall, health care will cost about $265 more per American under the health care overhaul.

In total costs, that means spending on health care will
grow to $4.6 trillion annually in 2019 under the law, $4.5 trillion without it. Last year, national health spending totaled about $2.5 trillion or just over 17 percent of GDP.

Medicare’s actuaries estimate that the government will become the dominant spender in health care costs. But it also finds that three out of five people under the age of 65 will continue to get their coverage through a private employer.

The insurance exchanges that will be set up under the law will also be more widely used than Congress estimated, according to the analysis.

Sisko and her colleagues estimate that more than 30 million people will get insurance through the exchanges by the end of the decade. That’s about 6 million more than estimated by the Congressional Budget Office.

In the end, neither side can claim that the study strongly backs its contentions about the costs of the health reform law. Republican opponents of the measure have long predicted its passage would send health care costs skyrocketing. The Obama White House has said it would lower costs by about $1,400 a person by 2019.