CMS: Health Care Spending Will Increase More than 5 Percent Per Year Through 2026

Aging population will be the main driving factor

Health care spending is projected to rise about 5 percent for the year 2018, but that may only be the tip of the iceberg, according to a recent report from the Centers for Medicare and Medicaid Services (CMS).

The report projects an annual increase between 5 and 6 percent through the year 2026, at which point health care spending will comprise approximately 20 percent of United States gross domestic product, or GDP.

Inflation, combined with the aging population of Baby Boomers, are the two driving factors beyond this increase. Annual inflation on healthcare services is projected at nearly twice that of typical economic inflation.

While the 5%–6% annual increase is significant, it still pales in comparison to the rate seen between 1990 and 2007, when spending grew at an average of 7.3 percent annually. The Great Recession and the Affordable Care Act ushered in an era of lessened spending, with average growths of 3.8 percent between 2008–2013, increasing to 5 percent from 2014 until 2016.

Not surprisingly, Medicare spending will be the fastest-growing of all categories, increasing by approximately 8 percent per year between 2019 and 2026. On the other hand, private insurance is projected to grow at a slower 4.7 percent rate.

SOURCE: Centers for Medicare and Medicaid Services

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