CMS: Despite Continued Slowdown in Health Care Cost Growth, Home Health Projected to Stay Strong

Health care spending in the United States is projected to grow 7.4 percent in 2005 and 7.3 percent in 2006, surpassing $2 trillion, according to a report released by the Centers for Medicare and Medicaid Services (CMS). The 7.4 percent growth rate is 0.5 percentage points less than the 7.9 percent growth observed in 2004 and represents the third consecutive year of decelerating growth. The decline is expected to continue in 2006.

Despite the projected slowdown, home health spending growth is expected to remain strong in 2005 at 13.2 percent, following 13.3 percent growth in 2004. Public payers, particularly Medicare, drive this trend. While growth of 15.3 percent for Medicare home health services in 2005 would mark the fifth consecutive year of double-digit growth, the trend is expected to average 6.9 percent from 2007-2015. Growth in home health services provided by Medicaid is expected to grow to 18.6 percent in 2005, and grow at an average rate of 10.9 percent between 2007 and 2015.

The report was prepared by the CMS Office of the Actuary and published online Feb. 23 by the journal Health Affairs. Projections are updated each year based on the most recent available data, which is currently 2004 data.

Underlying the slowdown in national health spending in 2005 and 2006 is an expected drop in personal health care spending. Influenced by legislated Medicare payment adjustments that are to be implemented in 2007, growth in personal health care spending is projected to fall to 7 percent that year. In 2008, growth is expected to rebound to 7.5 percent, but then gradually slow over the remainder of the 10-year projection.

Over the coming decade, with the aging of the population and changes in medical technology and utilization as the main contributing factors, national health expenditures are expected to double, growing an average rate of 7.2 percent per year. As a result, the health share of Gross Domestic Product (GDP), 16 percent in 2004, is expected to climb to 20 percent by 2015.

For more on health care spending , visit the CMS Web site at http://www.cms.hhs.gov/NationalHealthExpendData/03_NationalHealthAccountsProjected.asp.

This article originally appeared in the March 2006 issue of HME Business.

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