Employer Health Benefit Drop Contributes to Expected Higher Spending

July 28, 2011 (PLANSPONSOR.com) - The U.S. health bill will account for 19.8% of the nation's spending by 2020, up from 17.6% in 2009, outpacing projected average annual GDP growth, researchers have said, according to Business Insurance.

A report published online in the journal Health Affairs looked at projected U.S. health spending through 2020 and estimated about 30 million people will gain health insurance by the start of the next decade due to President Barack Obama’s health care overhaul.  According to the report, the average annual growth in national health spending is expected to be 5.8%, or 0.1 percentage point higher than it would be without the Affordable Care Act, Business Insurance said. 

The largest increase in health care spending in a single year is expected in 2014, when the Centers for Medicare & Medicaid Services CMS forecasts a rise of 8.3% from 2013 as much of the new U.S. health law is implemented. Spending growth will then average 6.2% annually from 2015 through 2020. 

According to the report, some large employers with low-wage employees are expected to stop offering health insurance in 2014. An estimated 13 million employees would then likely seek insurance in the new exchanges or by enrolling in Medicaid, Rick Foster, CMS’s chief actuary said, according to Business Insurance.   

Increased access to health insurance is another explanation for the high growth rate, because with access comes demand. The researchers estimated that doctor visits, clinical services and prescription drugs will be some of the largest growth areas, because of the comparably young age of the newly insured population. The report said younger patients tend to require less acute care.