Health care spending to hit $4 trillion by ‘15

America’s health care bill is expected to hit more than $4 trillion and make up 20 percent of the gross domestic product by 2015, according to federal projections being released today.

The expenses are expected to outpace the economy’s growth by 2.1 percent on average, which is a slower climb than in recent years, said John Poisal, an author of the report and deputy director of the national health statistics group at the Centers for Medicare and Medicaid Services (CMS).

“We can expect to have slight drops [in health care spending] in 2006 and 2007 followed by a slight bump up in 2008 and then a gradual growth after that,” Mr. Poisal said.

Health care costs have been climbing for decades, with the U.S. spending $1.87 trillion in 2004, according to a CMS report released last month.

Factors driving the increased costs include rising household incomes, increasing numbers of uninsured patients, an aging baby-boom population nearing eligibility for Medicare and changes in the health insurance industry, Mr. Poisal said.

Health care analyst Zach Wagner, with St. Louis retail brokerage firm Edward Jones, said consumers probably no longer will see double-digit rises in health care costs.

“The days of seeing 15 to 20 percent increases in health care costs in a single year are probably over,” Mr. Wagner said, adding that he forecasts a roughly 8 percent average annual increase for the industry over the next decade.

CMS, the federal health agency that handles public insurance programs Medicare and Medicaid, said health expenses rose 7.4 percent last year, compared with 7.9 percent in 2004.

Big health spenders include Medicare, the federal health insurance plan for senior citizens, and hospitals, which are reporting higher use of services and expanded facilities, the report said.

Medicare spending is expected to surge this year by 25.2 percent because of the implementation of the Part D prescription drug benefit.

The costs are expected to drop to a 5.4 percent increase in 2007 because of adjustments to managed care payments, with a 7.5 percent annual average increase after that until 2015, the report said.

Hospital spending last year was projected to have a 7.9 percent increase. Payments for the sector are expected to double by 2015, reaching $1.2 trillion.

Paul Ginsburg, president for the Center for Studying Health System Change, a Washington health policy research organization, called the CMS report “optimistic.”

“Because these authors are in the Health and Human Services Department, they are only following current laws on the books, which means they assume there will be continued physician payment cuts in Medicare. But people don’t expect that to happen,” he said.

Although its short-term projections are “relatively accurate,” long-term forecasts are less stable because of potential changes in U.S. laws and economy, said Stephen Heffler, director of the agency’s national health statistics group.

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