Accelerating growth in Medicare spending is the first sign of the coming demographic shift in the US according to a paper published in Health Affairs, the USA’s leading journal of health policy research.

The paper by the National Health Expenditure Accounts Projections Team led by economist Sean Keehan forecasts that healthcare spending in the USA will represent an ever-expanding proportion of the US economy over the next ten years. Spending is predicted to double to $4.3 trillion by 2017.

One of the key reasons for growth is an aging population. In 1946 the USA, like Britain, experienced the start of a baby boom and in 2011, the first of those babies will be 65 and become eligible for Medicare.

Despite Americans already spending around than double the UK expenditure per capita on healthcare, the US government’s Centers for Medicare and Medicaid Services are predicting that healthcare spending will account for 19.5% of the US gross domestic product by 2017, up from 16.3% in 2007, an increase from 14% four years ago.

US health-are spending in 2007 was $2.2 trillion; the forecast is that this spending will grow annually by about 6.7% for the next decade. GDP by contrast is expected to grow by just 4.7% annually, and inflation is expected to rise 2.4%.

By 2017, the Medicare bill - $427 billion in 2007 - is predicted to hit $884 billion, making up more than 20% of all US healthcare spending, while Medicaid, another large entitlement programme, is also expected to expand at a higher rate than overall healthcare spending. The National Health Expenditure Accounts Projections Team envisages Medicaid expanding at around 7.9% annually, before reaching $717 billion in 2017 and accounting for up to 17% of US healthcare expenditure.

By contrast, growth in private healthcare spending is projected to decline to 5.9% more per year by 2017, after reaching a high mark of 6.6% in 2009. Inevitably the drugs bill is expected to rise too, doubling to around $516 billion by 2017.

In 2008 growth in drug spending is expected to remain about the same as in 2007, although its composition is expected to change. Between 2008 and 2017 however, price growth is expected to average 3.7%.

Revised treatment guidelines are likely to create greater demand in some therapeutic classes (such as cholesterol and high blood pressure). Growth is also anticipated amongst high priced specialty drugs.

Recent savings from increasing the use of generics is expected to level off during the projection period, whilst the number of new drugs coming onto the market is expected to gently accelerate over the decade, somewhat offsetting savings on drugs that lose patent protection.

That publicly-funded healthcare in the USA already exceeds Britain’s NHS per capita spending is perhaps unsurprising when some 47 million of the nation’s 300 million population have no health insurance. By Steve Ainsworth