Projections for the next ten year show tremendous growth in healthcare costs
Each December, the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary releases its official and complete National Health Expenditure Data (NHED) for the previous year. So, in December, we will see the final 2024 results. Given the now expected $5 trillion plus in expenditures, it takes literally a year to sum it all up and categorize it.
Each June, though, the CMS actuary issues an estimate for the prior year and projects expenditures out ten years. We just got the CMS actuary’s projections for 2024 to 2033. As expected, the news is not good. The actuarial projections show a chilling annual trend that will have huge repercussions on costs over the next decade. More importantly, the huge growth in spending will impact coverage, benefits, employer costs, and out-of-pocket costs for Americans.
Why is NHED so important?
The report is literally the authority on all things healthcare in America. This data serves as the basis for almost all other governmental and private research on healthcare in the U.S. You can find multiple years’ reports at this link: https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data .
Estimated 2024 expenditures
Again, while final numbers come out in December, the actuary finds that total healthcare spending went over $5 trillion for the first time. In 2023, healthcare expenditures were $4.867 trillion. In 2024, they are estimated to be $5.263 trillion, up a hearty 8.1%. It took just five years to go from $4 trillion to $5 trillion in annual healthcare costs. Gross domestic product (GDP) grew 5.3% and personal income grew 5.4% from 2023 to 2024. Healthcare expenditures as a percentage of GDP jumped from 17.6% in 2023 to 18.0% in 2024.
The hearty increase from 2023 to 2024 was driven by the return of utilization post COVID pandemic, price increases, as well as rising drug costs (weight-loss, specialty and medical).
Projections through 2033
Overall expenditures are expected to grow from $4.867 trillion to $8.585, an increase of $3.718 trillion or 76.4%. From 2024 to 2033, average healthcare expenditure growth is projected to be 5.8% annually, which would outpace average GDP growth (4.3% annually). Healthcare expenditure growth in 2025 is expected to be 7.1% and then it drops into the “5%s” annually for the balance of the timeframe.
Per person expenditures will grow from $14,570 to $24,200 in the timeframe. Healthcare costs as a percentage of GDP are slated to increase from 17.6% in 2023 to 20.3% in 2033. The insured rate drops from 92.1 in 2024 to 91.3 in 2033.
In terms of major areas of the healthcare system, hospital expenditures are projected to grow 8.8% annually from 2023 to 2025 and drop to 5.4% annually for the balance of the projection period. Similarly, physician and clinic expenditures will grow 7.3% annually from 2023 to 2025 and then 5.1% annually for the balance of the period. Drug expenditures are expected to grow 9.5% annually from 2023 to 2025 and 4.9% annually for the balance of the period.
In terms of coverage sectors, Medicare is expected to grow 7.8% annually over the 10-year period, with Medicaid growing 6.4% annually and private coverage 5.2% annually.
#healthcare #spending #coverage
— Marc S. Ryan
