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Health spending could rise 5.5 percent a year through 2027. Here’s why

Despite all the debate about how to lower health spending in the U.S., federal experts foresee a continued rise in the price of keeping Americans healthy.

Newly released federal data suggests that Americans may spend 5.5 percent more on health care annually by 2027, and overall, health spending will make up a bigger portion of GDP than it does today.

Based on current law, the Centers for Medicare and Medicaid Services calculates that national health spending could add up to more than $5.9 trillion, up from the $3.5 trillion spent in 2017. These projections do not take into account changes in health care policy being proposed, for example, by politicians seeking the presidency in 2020.

In a study published Wednesday in the journal Health Affairs, CMS says health care spending could amount to about a fifth — 19.4 percent — of gross domestic product. That would be a slight dip from the projected 19.7 percent by 2026 that CMS reported last year. Right now, that numbersits at 17.9 percent.

By 2027, nearly 90 percent of Americans are projected to be insured under Medicare, Medicaid or private insurance — a stable rate at pace with population growth but a slight dip from the 90.9 percent of insured Americans today. But spending on Medicare is expected to grow at a faster rate than Medicaid or private insurance, according to the study, offering a clue about why overall spending is likely to increase.

After the Great Recession struck in 2007 and the Affordable Care Act became law in 2010, health care costs remained at relatively low levels for a decade, said Andrea Sisko, an economist with the Office of the Actuary at the Centers for Medicare and Medicaid Services and the study’s lead author.

Now, “prices for health care goods and services are projected to grow somewhat faster over the course of the projection period, and faster than seen over the last decade,” Sisko said during a conference call with reporters Wednesday.

Historically, the overall projections are more accurate than by-sector estimates, said Sean Keehan, an economist with CMS’ Office of the Actuary and co-author on the study. When asked about how rising drug prices factored into these estimates, Keehan urged caution. The prescription drug sector is volatile, he said.

When a new drug is introduced or a medication is yanked from the market, he said, it stirs volatility that makes reliable projections difficult to make.

So what’s fueling this growth in U.S. health spending in the coming years? National demographic trends, with more Baby Boomers aging into and qualifying for Medicare, and economic factors, such as a rise in disposable income, are expected to raise health care costs for the foreseeable future, the study authors said.