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Why America’s health-care spending is projected to soar over the next decade

(Washington Post illustration; iStock)

U.S. health-care spending grew 4.8 percent last year, as the country has emerged from a period of historically low health spending growth, according to new federal estimates. However, that growth is projected to accelerate over the next decade as Americans age and medical prices rise.

The country spent $3.4 trillion on health care in 2016, a number that is projected to grow to $5.5 trillion by 2025. The study, by the Centers for Medicare and Medicaid Services, projects that the average growth in health spending will be even faster between 2016 and 2025, at 5.6 percent per year, driven by inflation in the cost of medical services and products and an aging population.

The estimates were published in the journal Health Affairs on Wednesday.

The projections are based on an assumption that the legislative status quo will prevail — an unlikely scenario given President Trump and Republicans' plan to repeal and replace the Affordable Care Act.

The spending projections are similar to previous estimates, putting health care on track to make up about a fifth of the economy by 2025.

After several years of historically slow growth, health spending will pick up in part as medical prices increase, according to the study. Medical price inflation — the increase in the costs of doctors' visits, drugs and hospital care — has been at low levels, largely due to inflation overall being low after the recession and in part because of the expiration of a temporary payment increase to primary care providers in Medicaid, according to CMS economist Sean Keehan, who led the study.

The slower growth in 2016 was attributed to a variety of factors. Medicaid spending grew more slowly, and prescription drug spending, which grew 9 percent in 2015 due to expensive hepatitis C drugs, only increased 5 percent in 2016. That was in large part due to the slowing use of expensive drugs to treat hepatitis C.

Looking forward to 2025, prescription drug spending was projected to grow at 6.4 percent per year, faster than overall health spending and faster than the economy is expected to grow. The researchers credited the trend to the increased spending on high-priced specialty drugs but noted that most of the drugs used will continue to be cheaper generic drugs.

Medicare spending is expected to grow at an average of 7.1 percent per year over the 10-year period, while Medicaid spending is expected to grow at an average rate of 5.7 percent annually between 2017 and 2025.