Health spending in U.S. to rise 5.8 percent a year through 2025: CMS

[July 14, 2016]  By Ransdell Pierson

(Reuters) - Healthcare spending in the United States will likely grow by an average 5.8 percent per year over the next decade, a bit faster than the past two years, due to an aging population, rising medical prices and faster economic growth, according to updated projections from the federal government released on Wednesday.

The annual growth of health expenditures between 2015 and 2025 will be 1.3 percentage points faster than growth in gross domestic product, the Centers for Medicare and Medicaid Services (CMS) said in a report published in the independent journal, Health Affairs. The spending will represent 20.1 percent of the country's total economy by 2025, up from 17.5 percent in 2014, the report said.

Health spending rose 2.9 percent in 2013, according to the study, but rose 5.3 percent in 2014 and is expected to have risen 5.5 percent in 2015 largely as a result of millions of Americans gaining insurance coverage in 2014 under the federal Affordable Care Act, popularly known as Obamacare.

But overall U.S. spending increases will be tempered beginning this year, the study said, as numbers of uninsured people enrolling in Medicaid and insurance plans offered by state insurance exchanges wane. About 8 percent of Americans are expected to be uninsured in 2025, down from about 11 percent in 2014, CMS auditors said in the report. Total health expenditures this year are expected to reach $3.2 trillion, rising to $5.6 trillion in 2025.

Over the same decade, costs of hospital care are expected to jump 80 percent to $1.8 trillion, while spending on prescription drugs is seen rising 91 percent to $615 billion. "There's uncertainty in a lot of our estimates, especially on prescription drug spending," Sean Keehan, a CMS economist and a lead author of the study, acknowledged in a media conference call on Wednesday.

He said a single costly drug that is widely used, such as Gilead Sciences Inc's two-year-old Sovaldi treatment for hepatitis C, can drive up overall spending on pharmaceuticals. Sovaldi, which costs $84,000 per course of treatment, and a more costly related Gilead treatment called Harvoni, together captured $4.3 billion in sales during the first quarter.

"The consensus is no new Sovaldi is coming out” in the near future, Keehan said. Several other drugmakers, however, including Bristol-Myers Squibb and Merck & Co, have recently introduced immuno-oncology treatments with list prices of about $150,000 per year. And other drugmakers aim to follow suit.

(Reporting by Ransdell Pierson; Editing by Sandra Maler and Andrew Hay)

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