CMS: Aging Population will Contribute to $4.6 Trillion in Health Spending by 2020

The Centers for Medicare and Medicaid Services (CMS) recently released the National Health Expenditures spending projections through the next decade, with national health spending expected to reach $4.6 trillion by 2020 due to an aging population. The government-sponsored share of health spending is expected to increase from 45% to nearly 50% by that time.

The aging population and changing eligibility rules under the Affordable Care Act point toward a marked increase in Medicaid enrollment in 2014, when health spending is projected to grow 8.3%. Eligibility for the program will expand to include adults younger than 65 in households with income of up to 138% of the Federal Poverty Level, and when this happens, enrollment is expected to include an additional 19.5 million people, bringing the total to 75.6 million.

This will have a part in Medicaid expenditures rising an average of 7.5% per year from 2015 through 2020, when it is projected to pay for about 20% of all health care expenditures—5% more than in 2009.


While Medicare is projected to grow 5.9% in 2011, it is expected to experience a significantly lower 1.7% growth rate for 2012. CMS projects an annual average Medicare spending of 6.3% between 2013 and 2020, which reflects higher enrollment as baby boomers become eligible for the program. This in turn will drive up spending, especially as provisions of the Affordable Care Act call for reduced fee-for-service provider payment updates and lower payments to private plans, says CMS.

Currently, health care spending is at $2.6 trillion, with a growth of 3.9%, which is comparable to the GDP’s 2010 growth of 3.8%. However, between 2010 and 2020, health care spending, at a projected 5.8%, is expected to outpace overall economic growth by 1.1%. While the health care share currently comprises 17.6% of the GDP, CMS anticipates it will reach 19.8%, or $4.6 trillion, by 2020.

Between 2011 and 2013, health spending is projected to grow faster than it has in the recent past, reaching a rate of 5.5%, due to expected improvements in the economy. Spending had previously slowed due to continuing declines in employment, says CMS.


This indicates that when household incomes begin to rise, health care spending will rise, and employers will increase cost-sharing requirements in employer-sponsored insurance plans, which will raise the amount of out-of-pocket spending to a projected 3.9% in 2013, up from 1.8% in 2010.

In 2010, Medicaid spending actually decreased to 7.2%, down from 9% in 2009, due to a smaller enrollment in that year compared to the previous year. CMS says the program’s spending is projected to decelerate even more between 2011 and 2013, due to improved economic conditions (and thus higher co-pays) posing a lesser strain on the budget. However, this is anticipated to change by 2014.

Growth in private health insurance is expected to increase from lowered 2010 levels between 2011 and 2013, says CMS, as a result of anticipated gains in employer-sponsored insurance enrollment as overall employment levels increase. Additionally, in 2014, when Health Insurance Exchanges coverage expansion begins, an estimated 13.9 million people are expected to enroll, which would contribute to a 9.4% growth in private health insurance spending that year.

View the full report here.

Written by Alyssa Gerace