Healthcare/Marijuana, Markets, Politics

US Healthcare to Grow by 70% Over Next Decade

Healthcare spending will rise by 5.5% annually over next decade as more people get on Medicare. In order to cover these added costs, governments will be pressured to raise taxes and private insurers to raise premiums

1 min read February 22, 2019
  • Healthcare spending will rise by 5.5% annually over next decade as more people get on Medicare
  • In order to cover these added costs, governments will be pressured to raise taxes and private insurers to raise premiums
  • Investors of insurance and healthcare companies will benefit from increase in spending

Government health agency, Centers for Medicare & Medicaid Services (CMS), estimates that US health spending will reach $6T over the next decade. From 2018 – 2027, health spending is expected to increase annually by an average of 5.5% every year. This adds up to health spending that will be 70% higher in 2027 than it is today.

Rising income levels, better employment rate and more people enrolling for the federal health insurance program Medicare will cause healthcare spending to rise to 19.4 percent of the U.S. economy by 2027. In 2017, this figure accounted for 17.9% of the US GDP.

What does this all mean?

Well, approximately 47% of the health spending will be funded by government, compared to 45% in 2017. This additional money will have to be sourced from somewhere. The government will be left with two options to cover the higher spending: higher taxes or go into further debt. The likeliest scenario will be a combination of both.

The remaining 43% of health spending will be funded by private insurance companies. That is approximately an extra $1T in spending for insurers, who will likely raise premiums to cover the costs.

Who stands to benefit most?

Increases in healthcare spending will benefit insurers and healthcare companies. With the industry expected to increase by an average of 5.5% annually, the market remains healthy for investors in the following names:

Insurance Companies

  1. UnitedHealth Group (NYSE: UNH)
  2. Humana (NYSE: HUM)
  3. Berkshire Hathaway (NYSE: BRK.B)

Healthcare Companies

  • Amgen (NASDAQ: AMGN)
  • Merck (NYSE: MRK)
  • Bristol Myers Squibb (NYSE: BMY)

Article by: Francisco Cortez – Delgado
I graduated from Queen’s University with a Master’s of Political Studies. The intertwined world of politics and economics intrigue me. My favourite stories to cover are the ones that show how a few selected officials can impact nationwide macro-economic policies. I also follow the broader markets and FOREX.

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