Aging baby boomers will consume an ever-larger share of the nation’s health care spending over the coming decade, regardless of the success of Democrats running for president with ambitious plans to broaden Medicare.
The number of people covered through Medicare – and spending on the federal insurance program for older and disabled Americans – is expected to grow more rapidly than private insurance or Medicaid, eating up a larger chunk of health spending, according to a yearly forecast of U.S. health care expenditures released Wednesday.
The forecast also anticipates that without changes in federal policy, the share of Americans without health coverage will remain steady at about 10 percent, rising slightly by 2027, when 36 million people are expected to be uninsured.
In addition, the projections anticipate that consumers will pay an escalating portion of their medical bills out of their own pockets, with annual spending increases averaging 5 percent from next year through most of the next decade.
Taken together, the forecast prepared by the Centers for Medicare and Medicaid Services contains ammunition for and against Democrats framing their case for the 2020 presidential nomination around broader access to coverage and lowered costs, health policy experts say.
Several Democrats in the race have joined Sen. Bernie Sanders, I-Vermont, in advocating what they are calling “Medicare-for-all,” an umbrella idea aimed at universal health coverage with a larger federal role. They include Sens. Kamala Harris of California, Elizabeth Warren of Massachusetts and Cory Booker of New Jersey.
Others in the party, including potential 2020 candidate Sen. Sherrod Brown of Ohio, propose a more modest idea to allow Americans starting in their 50s to buy into Medicare early.
Chris Sloan, a director of Avalere, a Washington-based health care consultant, said the forecast provides grist for Democrats’ focus on public-sector approaches to universal coverage.
“After the Affordable Care Act dramatically reduced the number of uninsured, there are tens of millions left” without coverage, Sloan said. “That is, at the end of the day, the primary driver of the health reform conversation in the Democratic Party.”
Doug Holtz-Eakin, a former director of the Congressional Budget Office and president of the American Action Forum, a nonprofit focused on fiscal issues, said that “on the raw politics of the moment,” the forecast of more rapid spending on prescription drugs helps Democratic candidates.
“It’s easy to say, ‘We have a problem, and it’s going to get worse,’” to justify their plans, he said.
But Holtz-Eakin, a Republican, said the prediction that Medicare spending will rise faster than private insurance is “a problem for them.” Even though it can be attributed largely to changing demographics, he said, “then you have to explain that, and if you are explaining, you’re losing.”
However, Larry Levitt, executive vice president of the Kaiser Family Foundation, said that “if the government is already going to play a very big role in the health system, that, over time, may make proposals like Medicare-for-all less controversial.”
The government’s health spending projections are published by the journal Health Affairs based on the work of the CMS’ Office of the Actuary and are regarded as the authority on future U.S. medical spending, even though the forecasts have not always been borne out.
Specifically, the new forecast estimates that the nation’s health care expenditures will rise by an average of 5.5 percent between 2018 and 2027. By the end of that period, it says, that will account for 19.4 percent of the nation’s gross domestic product, an increase from 17.9 percent last year.
Medicare spending is predicted to rise annually by an average of 7.4 percent during the decade ending in 2027, compared with 5.5 percent for Medicaid and 4.7 percent for private insurance. Much of Medicare’s increase stems from the influx of Americans joining the program – usually when they become eligible at age 65. But its growth in per-person costs also is slightly higher than for the other two types of insurance.
In a telephone briefing for reporters, two authors of the report on the CMS actuary’s staff said that spending on prescription drugs, hospitals and doctors’ visits can be expected to rise at a more rapid pace, after a relative lull during the past several years.
Peter Orszag, global co-head of health care at Lazard and former director of the White House Office of Management and Budget early in the Obama administration, said he is skeptical of the projections.
“They have predicted an imminent acceleration of health care costs repeatedly over the last few years,” he said. “It hasn’t happened, and there’s no reason to expect it’s about to.”
Still, Orszag said the forecast is a reminder that Democratic pledges to reduce the ranks of the uninsured come at an expense. “Expanding coverage is a very worthy goal,” he said, “but it does not come for free.”