The continued low rate of estimated growth in national health spending in 2010 reflects two major factors.

• First, Medicare spending growth is estimated to have been lower as the rate of growth in payments to private plans under the Medicare Advantage program slowed in 2010.
• Second, the continuing impact of losses in employment and health insurance coverage associated with the recession helped to limit growth in private spending.

Private health insurance spending growth is estimated to have been just 2.6% in 2010 as the number of people enrolled in private plans fell by roughly 5 million. Moreover, out-of-pocket spending climbed just 1.8% (after 0.4% growth in 2009) as many people continued to restrain their use of health care goods and services.

• Underlying this projection is expected faster growth in private health insurance spending (reaching 4.8% in 2013), related to anticipated gains in employer-sponsored health insurance enrollment. Out-of-pocket spending is also projected to grow faster through 2013, averaging 3.2% growth in this period.
• The accelerated growth in out-of-pocket spending is driven by increases in disposable personal incomes during economic recovery and expansion, which in turn leads to greater use of more medical services.
• The projection is also based on an expectation that many employers will continue the recent trend of offering health insurance plans that require higher cost sharing, also leading to higher out-of-pocket spending.
• Reforms prescribed by the Affordable Care Act will continue to be implemented, including two programs that expand access to insurance coverage to specific populations.
  • The Pre-Existing Condition Insurance Plan program (for those who have had difficulty acquiring individual coverage because of their medical conditions) and
  •  the expansion of dependent coverage to eligible people under age twenty-six are projected to provide coverage to 1.6 million people in 2013.

The result will be an estimated 22.9 million newly insured people, some of whom will be covered through employer-sponsored insurance. The associated increases in Medicaid spending (20.3%) and private health insurance spending (9.4%) for this newly insured population are anticipated to contribute to a significant acceleration in the national health spending growth rate in 2014 (8.3%, compared to 5.5% in 2013).

Correspondingly, out-of-pocket spending is projected to decline by 1.3% as the number of people with insurance coverage increases and many services formerly paid for out of pocket are now covered by insurance.

Of the workers losing employer-based coverage, many are expected to obtain insurance coverage through the state exchanges, while others would enroll in Medicaid (and some would become uninsured). Also, the Affordable Care Act mandates an excise tax on high-cost insurance plans starting in 2018; costs of employer-sponsored health insurance plans that exceed $10,200 for an individual employee or $27,500 for dependent coverage will be subject to a 40% tax.

Consequently, many plans that exceed the taxable threshold are expected to provide enrollees incentives to enroll in plans with lower premiums and higher cost-sharing requirements. The effect is likely to be a slowdown in the growth of health services, health insurance premiums, and health spending overall. As a result, in our projection both premiums and the use of health services are expected to grow more slowly in 2018 than in the absence of this provision.