Hospital Spending Growth Forecast at 5.5% Annually though 2026

John Commins, February 14, 2018

Private insurance spending for hospital care is decelerating, owing to aging Baby Boomers transitioning to Medicare, the impending repeal of the individual mandate, and the growth of high-deductible plans that constrain utilization.    

Hospital spending will grow about 5.5% each year, from $1.3 trillion in 2018 to $1.8 trillion in 2026, driven largely by an aging demographic and price increases, according to Centers for Medicare & Medicaid Services projections

Hospital spending grew by 4.6% and 4.7% in 2016 and 2017, respectively, CMS said.

Related: US Healthcare Spending Accelerates

"While growth is expected to be the same or somewhat faster for most major payers for hospital care, including Medicare/Medicaid, growth for private health insurance spending for hospital care is expected to slow by 0.9 percentage points in 2017," CMS economist Andrea Sisko said Tuesday.

"That is due, in part, to the effect of high-deductible health plans on utilization that was more than offset by the Affordable Care Act coverage expansion in 2014 through 2016," Sisko said.

Hospital spending projections
Hospital spending is projected to reach $1.8 trillion in 2026, while national health expenditures overall are projected to reach nearly $5.7 trillion, according to CMS numbers published by Health Affairs on February 14, 2018. (Steven Porter/HLM)
 

The 0.9 percentage point deceleration is also projected for private health insurance spending for physician and clinical services, Sisko said.

“Otherwise, growth in projected prices and demographics are some of the factors driving spending by payers for the remainder of the projection period,” she said.

In 2017, 28% of workers were enrolled in high-deductible plans, compared with 5% in 2007, and CMS said there is increasing evidence that enrollment in high-deductible plans constrains the use of healthcare goods and services, particularly after the initial enrollment shift.

"The share of private health insurance enrollees in high-deductible plans is anticipated to stabilize over the projection period," CMS said. "Consequently, by the latter half of the period, both out-of-pocket and private health insurance spending for personal healthcare are projected to be driven by the same underlying factors (most importantly, disposable personal income that affects the use of healthcare goods and services)."

John Commins

John Commins is a senior editor at HealthLeaders Media.

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