US healthcare spending estimated to grow to $3.6T this year

Tony Abraham@TonyAbraham May 29, 2019

Dive Brief:

·         National healthcare spending is projected to grow to $3.6 trillion in 2019, up 4% from $3.5 trillion in 2018, according to new predictions from Fitch Solutions. The analysis predicts U.S. pharmaceutical spending will grow 2.5% to $370.7 billion.

·         The healthcare spending increase is largely attributed to Medicare's rise as a leading payer for prescription drugs. Fitch Solutions does not expect private health insurance to be a significant contributor to spending growth. However, out-of-pocket spending on prescriptions is expected to become more widespread due to the removal of the Affordable Care Act's individual mandate.

·         The forecast for the year is lower than what CMS anticipated in February. The Office of the Actuary had expected healthcare spending to increase to 4.8% in 2019, up from 4.4% in 2018. CMS also anticipates spending to grow by an average of 5.7% between 2020 and 2027.

The forecast from Fitch Solutions may be lower than what CMS predicted earlier this year, but it is still higher than the past few years. Health spending growth fell from 5.5% in 2007 to 3.2% in 2017. As spending and the cost of care continue to grow, so does the political pressure to contain prices, specifically the cost of prescription drugs.

That pressure has pitted segments of the healthcare industry against each other and, more importantly, has led executives to testify before Congress as politicians look to quell rising drug costs. In the past year, pharmacy benefit managers and pharmaceutical executives have each taken a turn testifying before the Senate Finance Committee, pointing fingers at each other for rising costs.

Several efforts are underway to contain growing drug prices, including HHS' proposal to change the safe harbor for drug rebates, the Trump administration's year-old drug pricing blueprint, and an HHS plan to create an International Pricing Index.

Meanwhile, out-of-pocket costs are also on the rise as the Trump administration's efforts to roll back Affordable Care Act protections leave more Americans uninsured. Colorado Gov. Jared Polis, a Democrat, last week signed a law attempting to tackle the problem of out-of-pocket drug costs by capping insulin prices. On the private sector front, Express Scripts unveiled plans in April to cap copays on insulin.

Medicare spending also continues to grow as more and more Americans age. Medicare's board of trustees predicts total Medicare spending will account for as much as 5.9% of gross domestic product by 2038, up ​from 3.7% of GDP in 2018.

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