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What Do The Latest Healthcare Spending Projections Tell Us?

The latest forecasts from the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary continue to show how out of control America’s healthcare spending is. Each June, the CMS Actuary re-estimates healthcare spending for the coming decade. The latest estimates continue to show a system that is badly in need of reform.

While final figures for 2023 will come in December, the latest estimate on 2023 healthcare spending shows it will reach about $4.8 trillion or 17.6% of gross domestic product (GDP). That is up from $4.46 billion or 17.3% in 2022. That is a growth of 7.6% from 2022 to 2023.

The major growth was in part related to the high insured rate of 93.1% due to the COVID flexibilities. While Medicaid redeterminations began again in April of 2023, the insured rate remained high in 2023. Medicare spending hit a milestone by growing 8.4% in 2023 and topping $1 trillion. Private health insurance spending is projected to have risen 11.1%. Medicaid growth was just 5.7% due to the redeterminations hitting.

The CMS Actuary says healthcare spending will reach $7.7 trillion in 2032, or 19.7% of GDP. Thus, just below one-fifth of the entire economic output of the nation will be consumed by healthcare. That is an average annual growth rate of 5.6%. Annual average growth in GDP in that timeframe will be 4.3% — and that is likely an overestimate. Per capita healthcare spending will grow from $14,423 in 2023 to $21, 927 in 2032.

Over the 2023 to 2032, average annual expenditure growth is expected to be the following:

  • For Medicare — 7.4%. Costs will go from just over $1 trillion in 2023 to over $1.9 trillion in 2032. Enrollment would grow from 65.3 to 77.7 million. Enrollment would drop from 91.2 to 85.4 million. Per enrollee spending would grow from about $15,700 to $24,900.
  • For Medicaid — 5.2%. Costs will grow from over $850 billion in 2023 to over $1.3 trillion in 2032. Per enrollee spending would grow from about $9,300 to $15,600.
  • For private health insurance — 5.6%. Costs will go from over $1.4 trillion to over $2.2 trillion. Enrollment would remain roughly flat at about 209.6 million. Per enrollee spending would grow from about $6,800 to $10,600.
  • For out-of-pocket spending — 4.7%.

Looking at healthcare service categories, over the 2023 to 2032 period, average annual expenditure growth is expected to be the following:

  • Hospitals5.7%. Hospital spending is a very high 30% of all healthcare spending and will not come down at all over the next decade, showing our healthcare system remains heavily dependent on expensive places of service.
  • Physician and clinical services – 5.6%
  • Retail pharmacy – 6.0%

While the short-term coverage costs are good in my view, much of the spending growth seen and projected shows a healthcare system in dire shape, with spending increases eating up GDP and the threat of unsustainable trends in the future. Much of it is driven by a system overly reliant on transactional payments that are by nature inflationary as well as indemic waste, fraud, abuse, and duplication in the system. It is time to be serious about healthcare reform and prioritizng coverage, price reform, and investments in wellness, prevention and care management.

Sources and additional reading:

https://www.fiercehealthcare.com/finance/cms-projects-national-health-spending-grew-75-2023-48t

https://www.modernhealthcare.com/policy/national-health-spending-projected-reach-77t-2032-cms

https://www.healthcaredive.com/news/national-healthcare-spending-growth-cms-report/718718

https://www.cms.gov/newsroom/press-releases/cms-releases-2023-2032-national-health-expenditure-projections

#healthcare #healthcarereform #spending #coverage

— Marc S. Ryan

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