New Normal For Health Care Spending

U.S. health care spending is likely to grow at about the rate of inflation over the rest of the decade after the pandemic fueled a nearly 10% jump between 2019 and 2020, federal experts said Monday.

The big picture: The CMS actuaries’ projections in Health Affairs came with plenty of caveats. But if trends hold, out-of-pocket spending is going up, as is spending on private coverage, Medicare and Medicaid.

What they’re saying: “This outlook is contingent on a virus that has evolved and surprised at every turn — and could do so again,” the authors wrote.

By the numbers: National health spending surged 9.7% in 2020, rising from $3.8 trillion in spending in 2019 to $4.1 trillion in spending in 2020.

  • * Spending growth is projected to drop to less than half of that, 4.2% in 2021, or about $4.3 trillion.
  • * The actuaries project 4.6% spending growth in 2022, or about $4.5 trillion.

Zoom out: Spending is expected to grow an average of 5.1% between 2021 and 2030 when it would reach almost $6.8 trillion. Growth in the Gross Domestic Product is also projected to be 5.1% annually over the same period.

  • * That will keep the health share of the economy at just shy of 20%.
  • * Spending should be driven by more traditional economic, demographic and health-specific factors after it surged on pandemic-fueled assistance to health providers, public health programs and Medicaid payments.

Between the lines: Costs are also projected to rise.

  • * For those on private health insurance plans, per-enrollee spending dropped nearly half a percent in 2020 before rising by a projected 5.5% in 2021. The report projects an 8.3% jump in 2022 and 7.2% increase in 2023.
  • * Per enrollee spending on Medicare is projected to jump 9.4% in 2021, 5.1% in 2022 and 3.3% in 2023. Per enrollee spending on Medicaid is projected to increase 2% in 2021, 6.7% in 2022, and 6% in 2023.
  • * Out of pocket spending dropped by 3.7% in 2020. Projections show it jumping 4.6% in 2021 and 6.1% in 2022.

The bottom line: Health spending is going up (big surprise!) in traditional categories like hospitals, prescription drugs and doctors and clinical services through 2024 while pandemic-related effects like COVID vaccines, testing and treatment and expanded Medicaid coverage fall off.


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