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Health costs predicted to continue outpacing economic growth

Despite a recent easing of medical costs, the nation's health care spending will keep outpacing economic growth for the foreseeable future, government experts said Tuesday in a forecast that signals more upheaval for Medicare and Medicaid, as well as private insurance.

President Obama's health care overhaul will add $478 billion in spending from 2011 to 2021, the period covered by the projections, as coverage is expanded to about 30 million uninsured people. But the issue of rising costs will not go away even if the Supreme Court overturns Obama's law or his Republican foes ultimately succeed in repealing it.

By the beginning of the next decade, health care spending will be growing roughly 2 percentage points faster than the overall economy, "which is about the same differential experienced over the past 30 years," said the report from Medicare's nonpartisan Office of the Actuary.

The findings have implications for both sides of the political divide. If health care spending isn't brought in line with overall economic growth, Americans will eventually face agonizing choices between paying medical bills and funding other priorities such as education and infrastructure.

By 2021, health care will account for nearly 20 percent of the U.S. economy, the report found, up from less than 14 percent in 2000.

Controlling health care costs is one of the keys to solving federal budget woes, but that probably can't be done without major changes to Medicare and Medicaid.

A major question this year has been whether fledgling payment revisions in Obama's law, also mirrored by private insurance plans, are succeeding in holding costs down. The rate of growth the past three years has hovered under 4 percent, historically low. That has coincided with a shift to paying hospitals and doctors for better quality, not just the sheer volume of tests and procedures.

Obama has argued that his overhaul would begin to "bend the cost curve" to more affordable levels.

The analysts remained skeptical.

"We are certainly looking at that," Sean Keehan, a senior economist with the actuary's office, said of the health law's changes. "We are waiting to see that there is definitive evidence that these types of [policies] can lower growth and also extend over time."

Keehan said the economy is behind the recent easing of cost pressures. People who lost jobs also lost health insurance. Patients with coverage put off elective surgery or expensive diagnostic tests to save on their co-payments. Employers facing a loss of revenue shifted a bigger share of health care costs to their workers in the form of higher deductibles, the annual amount you pay before insurance kicks in.

"This really has to do with the lingering effects of the recession," Keehan said.

The report projects modest growth of just over 4 percent for the next couple of years. Then in 2014, spending will jump by more than 7 percent as the big coverage expansion in Obama's overhaul takes hold. Nearly 20 million uninsured people will be newly eligible for Medicaid, the federal-state insurance program for low-income people. And more than 12 million people will buy private coverage through new state health insurance markets.

From 2015 to 2021, the report projects health spending to grow an average of about 6 percent a year.