Tuesday, July 16, 2024

Health Expenditure Projections for 2023-2032 Released by CMS

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Health expenditure and insurance enrollment projections for 2023-2032 have been published by the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary. These projections indicate that the average annual growth in NHE, at 5.6%, will surpass the average annual growth in gross domestic product (GDP), which is projected at 4.3%. As a result, the health spending share of GDP is expected to rise from 17.3% in 2022 to 19.7% by 2032.

The report includes anticipated effects from the Inflation Reduction Act of 2022 (IRA), particularly regarding Medicare’s Part D drug benefit redesign, negotiations on certain high-cost drugs under Medicare Parts B and D, and trends related to the temporary extension of enhanced subsidies for Marketplace plans.

Over the decade spanning 2023-2032, NHE growth is projected to average 5.6% annually. This rate is slightly lower than the 7.5% growth estimated for 2023. In comparison, GDP growth for 2023 was projected at 6.1%. The higher NHE growth in 2023 reflects broad increases in healthcare usage linked to an unprecedented insured share of the population, which reached 93.1%. This high enrollment rate in 2023 was primarily driven by record-high Medicaid enrollment and increases in direct-purchase insurance enrollment.

Health Expenditure Growth Remained Modest in 2023, Set to Outpace GDP by 2027

Healthcare price growth remained modest in 2023, with an increase of 2.5% as measured by the Personal Health Care Price Deflator. This rate was higher than the period immediately preceding the COVID-19 Public Health Emergency (PHE), indicating a slight acceleration in healthcare costs post-pandemic.

From 2027 to 2032, the growth in personal healthcare price inflation and the use of healthcare services and goods is expected to drive health spending at an annual rate of 5.6%, outpacing the projected GDP growth rate of 4.1%. This continued higher growth rate in health expenditures relative to the overall economy underscores the increasing financial burden of healthcare on the U.S. economy.

The NHE report is regarded as the “official” estimate of U.S. health spending and health insurance enrollment. It provides a comprehensive analysis of total annual U.S. spending on health care goods and services, categorized by the type of good or service (such as hospital care, physician services, prescription drugs, etc.) and by payer (including private health insurance, Medicare, Medicaid, and others).

Health Expenditure

Inflation Reduction Act of 2022 to Shape Future Health Expenditure Trends

The Inflation Reduction Act of 2022 (IRA) is expected to significantly influence health expenditure trends. Key provisions of the IRA include the redesign of Medicare’s Part D drug benefit, which aims to reduce out-of-pocket costs for beneficiaries and implement spending caps. Additionally, the IRA includes measures for Medicare to negotiate prices for certain high-cost drugs, which is anticipated to lower overall drug spending under Medicare Parts B and D. The temporary extension of enhanced subsidies for Marketplace plans is also expected to impact enrollment and spending trends, contributing to the projected growth in NHE.

The projections outlined in the NHE report have significant implications for healthcare policy and planning. The anticipated rise in health spending as a share of GDP highlights the need for continued efforts to manage healthcare costs and improve efficiency within the healthcare system. Policymakers will need to consider strategies to address the financial sustainability of healthcare programs, particularly as the population ages and the demand for healthcare services increases.

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The CMS Office of the Actuary’s projections for 2023-2032 underscores the ongoing challenges associated with rising healthcare costs and the need for effective policy measures to manage these expenditures. With health spending expected to grow at a faster rate than the overall economy, it is crucial to implement policies that enhance the efficiency and affordability of healthcare. The impact of legislative measures like the Inflation Reduction Act will be closely monitored to assess their effectiveness in curbing costs and improving access to care. These projections serve as a critical tool for policymakers, healthcare providers, and stakeholders in planning for the future of healthcare in the United States.


Resource: Center for Medicare and Medicaid Services, June 12, 2024

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