National Health Expenditure Projections 2006-2016

The Office of the Actuary (OACT) in the Centers for Medicare and Medicaid Services (CMS) annually produces 10-year projections of health care spending for categories within the National Health Expenditure Accounts (NHEA). The NHEA track health spending by source of funds (for example, private, Medicare, Medicaid) and by type of service (hospital, physician, pharmaceuticals, etc.).

To produce projections for total National Health Expenditures (NHE), OACT combines projections for Medicare and Medicaid spending (based on actuarial techniques) with projections for private health
spending (based on a multi-equation structural econometric model, hereafter referred to as the NHE Projection Model). The NHE Projection Model attempts to capture the causal relationships between major macroeconomic variables and private health spending, as well as interactions among major causal variables within the health sector. The macroeconomic and demographic outlook from the 2006 Trustees Report and the projections of Medicare and Medicaid spending produced by OACT are exogenous inputs into the model.

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