Growing demand for care, record levels of insured patients and swelling Medicare enrollment will drive up annual health care spending to $7.7 trillion by 2032, up from $4.8 trillion last year, according to new projections from federal actuaries.
Why it matters: Health care spending is projected to grow 5.6% per year over the course of a decade, outpacing expected annual inflation of 4.3%.
- That will help grow health spending to nearly 20% of gross domestic product by 2032, up from 17.3% in 2022, according to the actuaries’ long-term outlook.
- It’s projected that annual health spending grew 7.5% in 2023, up from 4.1% the previous year and reflecting the “broad increases in the use of health care” as the COVID-19 public health emergency ended.
Between the lines: The report also captures the Inflation Reduction Act’s anticipated effects on Medicare drug spending.
- The annual growth in what patients themselves spend on drugs will be roughly halved to 3.7% in 2025-26 as provisions like an out-of-pocket cap and drug price negotiations kick in.
- But the out-of-pocket cap is also expected to drive up Medicare spending as more drug costs are shifted onto the government.
- However, actuaries project that spending will be pushed down by manufacturer discounts for low-income patients starting in 2025, as well as drug price negotiations and the linking of price increases to inflation.