Urban Institute examines drop in spending growth projections

A new report from the Urban Institute examines how national health expenditures projections from the Centers for Medicare & Medicaid Services (CMS) have changed in recent years as spending growth has slowed. The Urban analysis points out that the current CMS projection for health spending between 2014 and 2019 ($21.0 trillion) is notably lower than previous projections for the same time period ($23.0 trillion in February 2010 and $23.6 trillion in September 2010).

CMS’s current health expenditures projection for 2014 to 2019 is $2 trillion less than it projected before the Affordable Care Act (ACA) was enacted, and $2.5 trillion less than projected just after its passage.  According to the report, that $2.5 trillion includes a $384 billion drop in the spending projection for Medicare, a $927 billion drop for Medicaid, and a $688 billion drop in private health insurance expenditures.

The current projection may prove to be an overestimate if certain trends persist and sustain moderated spending growth, according to the report. These trends include lower marketplace premiums, constrained Medicare payment rates (which may be driving a drop in Medicare utilization, and thus in payments), and the shift to high-deductible and narrow network employer-sponsored coverage. On the other hand, the $21.0 trillion spending projection through 2019 could also be an underestimate, depending on how much costly specialty drugs continue to boost spending, and also on the consumer and regulatory agency response to higher deductibles and narrowing networks – a backlash could also prompt higher spending.

“Clearly, not all of the spending reduction is due to the ACA; much is due to the recent recession and a long period of slow income growth, the growth of high deductible private health plans, cost constraints within state Medicaid programs, and Medicare policies unrelated to the ACA (e.g. sequestration). But it is also likely that the law contributed; though how much is impossible to estimate.”

Urban Institute

See our previous blog posts for more on the slowdown in health spending: