National health spending growth will average 7.2% annually over the next 10 years—2.1 percentage points faster than growth in GDP—and will reach 20% of GDP in 2015, according to a CMS forecast published in Health Affairs. Hospital spending is noteworthy because it is higher than other healthcare sectors. Hospital spending growth for private payers will be 9% this year, and drop to 7.9% in the following nine years due to a decrease in utilization. For public payers, however, hospital spending growth will slow to 6.4% in 2006 as a result of declining Medicaid enrollment. Spending will decline even further in 2007 to 5.5% as adjustments are made to Medicare managed care payments, and then increase to 6.8% for the rest of the period.
Compared to last year, private real per capital hospital spending in 2006 jumps significantly to 4.1% before leveling off to 2.8% annually between 2007 and 2015. “The change in outlook reflects both revisions to the historical data and a new interpretation of the fundamentals underlying the ongoing urban hospital construction boom,” says the CMS report. The slowdown starting next year reflects the impact of consumer-directed healthcare. Yet, “private hospital spending as a share of private personal health care spending is up four percentage points by the end of the projection period (33 percent in 2015, from 29 percent in 2004). Given the downturn in public spending growth, total hospital spending as a share of total personal health care remains flat at 37 percent over the entire forecast period,” according to the report.
Read the HFMA Views post on the CMS estimates for healthcare spending.
