CCRC Spending to Hit $270 Billion by 2023

While health care spending in 2013 has remained stable compared to recent years passed, it is largely expected to consume a greater portion of gross domestic product over the next decade as the baby boomer population ages and more Americans gain health insurance coverage, according to spending projections released last week by the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary.

Of note among the actuary projections is a roughly 67% anticipated increase in spending for nursing care and continuing care retirement communities (CCRCs) from this year until 2023.

In 2014, CMS noted CCRC expenditures at approximately $162.3 billion. By 2023, the agency projects spending in this sector to amass $271.4 billion. On an annual basis, spending is projected to grow approximately 4.9% over the next year to $170.2 billion in 2015.

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Growth in national health spending is projected to increase to 5.6% in 2014 as nine million uninsured Americans gain health insurance. Additionally, expected changes to insurance markets this year, such as the availability of more generous coverage options for people who were previously insured, will also likely contribute to accelerations in spending.

But while enrollment shifts like these stand to have significant impacts in the nation’s overall health care expenditure, changing demographic trends will also carry weight, particularly as more baby boomers shift from private insurance to Medicare.

“The 5.7% annual growth in overall health spending through 2023 is occurring as additional baby boomers continue to age into Medicare and as the number of uninsured people is projected to fall from roughly forty-five million in 2012 to about twenty-three million by 2023,” notes the report published in Health Affairs.

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During the full projection period of 2013-2023, CMS projects national health spending to increase at an average rate of 5.7% per year, or 1.1 percentage points faster than the average annual growth rate in nominal—that is, not adjusted for inflation—GDP.

As a result, the share of GDP devoted to health care is projected to rise from 17.2% in 2012 to 19.3% by 2023, the data notes.

While this pace may appear faster compared to spending growth in recent history, it is comparatively slower than the 7.2% average annual growth experienced between 1990-2008, which was 2 percentage points faster than growth in GDP.

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The period in which health care has represented a stable share of economic output is soon coming to an end, with shifts in the nation’s aging population and health insurance enrollment largely driving increases in spending over the next decade.

“It is anticipated that by 2017, once the mostly one-time transition effects of expanded coverage have fully transpired, the health share of GDP will increase, albeit at a slower rate than its historical average, as an improving economy and the aging of the baby boom generation lead to faster health spending growth,” the report concludes.

View the CMS Office of the Actuary Report.

Written by Jason Oliva

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