Health care spending to reach nearly 20% of GDP by 2027

That is the conclusion from a Health Affairs article by Sisko et al. (2019).

National health expenditures are projected to grow at an average annual rate of 5.5 percent for 2018–27 and represent 19.4 percent of gross domestic product in 2027. Following a ten-year period largely influenced by the Great Recession and major health reform, national health spending growth during 2018–27 is expected to be driven primarily by long-observed demographic and economic factors fundamental to the health sector. Prices for health care goods and services are projected to grow 2.5 percent per year, on average, for 2018–27—faster than the average price growth experienced over the last decade—and to account for nearly half of projected personal health care spending growth.

The following graph decomposes the projected increases in health care spending in recent years and in the projection from CMS’ Office of the Actuary (OACT).

Pharmaceutical spending is projected to grow by 6.1% per year between 2020-2027. This growth, however, is largely due to the aging of the U.S. population and older individuals typically use more pharmaceuticals.

Source:

• Andrea M. Sisko, Sean P. Keehan, John A. Poisal, Gigi A. Cuckler, Sheila D. Smith, Andrew J. Madison, Kathryn E. Rennie, and James C. Hardesty. National Health Expenditure Projections, 2018–27: Economic And Demographic Trends Drive Spending And Enrollment Growth. Health Affairs. https://doi.org/10.1377/hlthaff.2018.05499.