Health Spending Growth Slowed In 2022. That Trend’s Set To Change, Experts Say

Health Spending Growth Slowed In 2022. That Trend's Set To Change, Experts Say

While national health spending growth slowed in 2022, that trend isn’t likely to stick around.

Experts at the Centers for Medicare & Medicaid Services’ Office of the Actuary predict that health spending growth will outstrip growth in the economy over the next decade, according to a study published in Health Affairs. Between 2022 and 2031, the actuaries predict spending will increase by 5.4% on average each year, faster than the estimated annual gross domestic product growth of 4.6%.

National health expenditures will hit $7.17 trillion by 2031, according to the analysis, or about $1 out of every $5 spent in the U.S. will be on healthcare.

The U.S. spent $4.4 trillion on healthcare last year, according to CMS actuaries.

Recent legislation such as the Inflation Reduction Act and the expiration of the COVID-19 public health emergency will impact trends in the long term, according to the actuaries. For instance, insurance rates reached a historic high of 92.3% in 2022, which will carry through 2023.

However, with the onset of Medicaid redeterminations as well as the end of expanded subsidies for individual market plans in 2025, the insured rate is expected to drop to 90.5% by 2031, according to the report.

The Inflation Reduction Act also significantly overhauled cost-sharing in Medicare Part D and gave the Department of Health and Human Services the power to negotiate prices for certain medications. The changes are likely to have a slim but still noticeable impact on Medicare spending, according to the report.

Spending in Medicare is expected to grow at the fastest rate among major insurers, increasing by 7.5% each year on average. The last of the baby boomers aging into Medicare will be in 2029, a major trend to watch, according to the report.

Spending in private health plans, including the individual market, is projected to increase by 5.4% annually, and spending in Medicaid is expected to grow by 5%. The actuaries said they expect out-of-pocket spending to increase by 4.3%.

In addition to examining spending in particular types of coverage, the study dives into likely growth among spending on specific service lines. Hospital spending is projected to grow the fastest, increasing by 5.8% on average per year between 2022 and 2031.

Spending on physician and clinical services is expected to grow by 5.3% annually in that same window and spending on prescription drugs by 4.6%. Price growth for hospital services is also expected to outpace physician and clinical services as well as drug prices, according to the report.

Overall, the researchers project that healthcare will account for 19.6% of GDP by 2031, reaching  $7.1 trillion per year.

“Altogether, and consistent with its past trend, health spending over the course of the next ten years is expected to grow more rapidly, on average, than the overall economy, and by 2031, it will account for roughly $1 out of every $5 spent in the US,” the actuaries wrote.


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