Health Care Costs to Account For One-Fifth of Economy by 2020: Report

   on July 28 2011 11:38 AM
At Issue: U.S. Health Care Policy
A new study uncovers the link between U.S. high health care costs and doctor fees. REUTERS

Continually rising health care costs will account for one-fifth of America's gross domestic product by 2020, a trend that will be driven only slightly by the Affordable Care Act, according to government analysis.

A report by the federal Centers for Medicare and Medicaid Services projects an annual growth of 5.8 percent in medical spending over the next decade, That is 0.1 percent more than what the increase would have been if the health care overhaul was not factored in, with the government's share of health care spending rising from about 45 percent to about 49 percent.

"We are projecting a decline in the out-of-pocket share [for consumers], but that doesn't mean that the consumer's burden is going to be substantially reduced," said Sean Keehan, a co-author of the report. "Especially since we're projecting health spending to grow at a faster rate than economic growth and disposable personal incomes."

The report anticipates a surge in spending in 2014, the year when many of the provisions of the healthcare law take effect. About 30 million people expected to obtain health insurance of them, with a portion of them seeking insurance through government programs like Medicaid or newly established state-based insurance exchanges.

Some economists criticized the report, saying its estimates were overly optimistic and that the costs of the new law were likely to be higher.

"You can't draw the conclusion that health reform is going to extend coverage to tens of millions of people and spending is going to remain essentially the same," said Joseph Antos, a health policy expert at the American Enterprise Institute. "I wish it were true, but it just can't be. This depends on everything working perfectly, including some politically very painful cuts to Medicare."

But officials with the Obama administration said the report demonstrated the effectiveness of the new law, noting that it would add minimally to costs while greatly expanding access to health care. A statement responding to the report also linked a low level of spending growth in 2010 to expanded access to prescription drugs for senior.

"The bottom line from the report is clear: More Americans will get coverage and save money and health expenditure growth will remain virtually the same," White House deputy chief of staff Nancy-Ann DeParle said in a statement.

 

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