A report from the Centers for Medicare and Medicaid Services’ Office of the Actuary concludes that the nation’s growth in health care spending during the next 10 years will be modest compared with historical trends.

The annual National Health Expenditure report predicts that spending in several areas including hospitals, prescription drugs, out-of-pocket costs, and Medicare, will be below their peak rates during the past decade, with the Affordable Care Act a contributing factor. The Office of the Actuary estimates that Medicare spending increased 4.6 percent in 2012 compared with 6.2 percent in 2011, to a total of $579.9 billion.

The report predicts increases in the number of Medicare enrollees, utilization and input prices will lead to an average annual increase of 7.4 percent between 2015 and 2022, compared with a 9.3 percent average rate during the past 10 years, as reform law provisions reduce fee-for-service and private plan payment growth. Average out-of-pocket spending will fall from 11.4 percent in 2012 to 9.1 percent in 2022 because of expanded insurance coverage.

The Office of the Actuary also forecasts 6.3 percent average growth annually in total hospital spending between 2015 and 2022. That compares with less than five percent during the past three years including 2013. Factors in higher total cost will include spending among newly insured individuals, an improved economy that will lead to higher health spending, more aging of the population and Medicare hospital payment update reductions.

The report estimates prescription drug spending declined 0.8 percent in 2012 compared with growth of 2.9 percent in 2011, because several popular brand-name drugs lost their patent protection.

Physician and clinical spending rose 4.6 percent in 2012 compared with 4.3 percent the previous year and is projected to increase to 7.1 percent in 2014 as more individuals are insured. The office estimates that overall Medicaid spending per enrollee will fall by 2.8 percent in 2014 as expansion of the program will bring in more non-disabled children, as well as younger and non-disabled adults. Because expansion is projected to cover nearly 9 million new members in 2014, total Medicaid spending could increase by 12.2 percent.

For a copy of the “National Health Expenditure Projections for 2012-2022,” published in Health Affairs, click here.

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