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WASHINGTON - By 2017, consumers and taxpayers will spend more than $4 trillion on healthcare, accounting for $1 of every $5 spent, the federal government projects.
The 6.7 percent annual increase - nearly three times the rate of inflation - will be largely driven by higher prices and an increased demand for care, the Centers for Medicare and Medicaid Services said yesterday. Other factors include a growing and aging population. The first wave of baby boomers will be eligible for Medicare in 2011.
Overall, federal and state governments accounted for about 46 percent of health expenditures in 2006. That will increase to 49 percent over the next decade.
Overall healthcare spending in 2017 was estimated to increase to $4.3 trillion. In 2006, people and the government spent $2.1 trillion on healthcare, an average of $7,026 a person. In 2017, health spending will cost an estimated $13,101 a person.
In his budget for next year, President Bush recommended slowing the yearly growth of Medicare from about 7 percent to about 5 percent, primarily by freezing reimbursement rates for the next three years. Bush also proposed requiring wealthier Medicare beneficiaries to pay higher premiums when participating in Medicare's prescription drug coverage plan.
Those recommendations would reduce spending by nearly $178 billion over five years, but have little chance in Congress. Health and Human Services Secretary Mike Leavitt has acknowledged the unpopularity of the recommendations, but said politicians must make hard decisions. The longer the wait, the more difficult the decisions will be. "Medicare, on its current course, is not sustainable," he said.
Democratic lawmakers also have proposed ways to slow spending, primarily by trimming payments to private insurers who oversee health coverage for nearly 9 million Medicare beneficiaries. A growing number of the nation's elderly and disabled get health coverage through private plans that contract with the government, and government economists predict that trend will continue. About one in six beneficiaries get their health benefits through a private plan. By 2017, more than one in four will get their coverage that way, Medicare officials said.
Health experts say Medicare pays more for each beneficiary who opts for a private plan than it would with traditional Medicare, which reimburses providers with set fees. That difference increases the burden on taxpayers as well as beneficiaries, because participants pay higher monthly Medicare premiums.
Over the past 30 years, health spending has exceeded growth in the gross domestic product by about 2.7 percentage points each year. Over the coming decade, that difference is expected to narrow slightly. Still, the continued gap is worrisome, said the agency's acting administrator, Kerry Weems. He said consumers and businesses need more information about the quality and cost of care.
"We have an approaching crisis in this country unless we change the way we do business," Weems said.
Within the health sector, economists project that spending on hospital care will increase at rate of 6.9 percent a year over the coming decade, spending on physician services will rise 5.9 percent annually, and spending on nursing homes will grow 5.2 percent a year.
The economists' report will be published online by the journal Health Affairs.
© Copyright 2008 Globe Newspaper Company.
