CMS report: Health spending will rise

WASHINGTON – CMS's Office of the Actuary projects that average annual growth in national health expenditures (5.6%) will outpace average annual growth in GDP (4.3%), resulting in an increase in the health spending share of GDP from 17.3% in 2022 to 19.7% in 2032. 

The NHE estimates discussed in the office’s new report contain expected effects from the Inflation Reduction Act of 2022 (IRA), including anticipated effects associated with the law’s provisions regarding the redesign of Medicare’s Part D drug benefit, negotiations on certain high-cost drugs under Medicare Parts B and D, and expected enrollment and spending trends related to its temporary extension of enhanced subsidies for Marketplace plans. 

The 5.6% growth rate in national health expenditures over 2023-32 is lower than in 2023 when NHE growth was projected to have been 7.5%, faster than GDP growth of 6.1%, reflecting broad increases in the use of care associated with an insured share of the population of 93.1% (an unprecedented high). 

Selected highlights on NHE spending by major payers include: 

• Medicare: Average annual Medicare expenditure growth is projected to be 7.4% for 2023-2032. Over 2030-2032, Medicare spending growth is expected to be somewhat lower (7.0%), reflecting projected slowing enrollment growth after the last of the baby boomers (those born between 1946 and 1964) enroll in 2029.   

• Medicaid: For 2023-2032, the average rate of growth for Medicaid spending is projected to be 5.2%. State eligibility redeterminations resumed in 2023 following the expiration of the Families First Coronavirus Response Act’s continuous enrollment provisions, and many individuals were disenrolled in 2023 (and more in 2024) as a result. After 2024, Medicaid enrollment is expected to stabilize as eligibility processes return to normal. 

• Private health insurance: The average rate of growth for private health insurance spending over 2023-2032 is projected to be 5.6%. Enrollment gains in direct-purchase plans (which include Marketplace plans) are expected through 2025 related to the temporary extension of enhanced Marketplace subsidies and the Special Enrollment Period. Enrollment is projected to fall in 2026 when the enhanced subsidies expire under current law. 

• Out-of-pocket: The growth rate for out-of-pocket spending is projected to average 4.7% during 2023-2032, impacted in part by the implementation of the $2,000 cap on Part D covered Part D enrollee prescription drug out-of-pocket expenses and lower gross prices on drugs subject to the IRA’s negotiation provisions that serve to lower out-of-pocket payments for people with Medicare prescription drug coverage. 

The report is published annually and is often referred to as the “official” estimates of U.S. health spending and health insurance enrollment. 

• The Office of the Actuary’s 2023-2032 projections will be published at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html 

• A Health Affairs journal article from CMS’s Office of the Actuary is available here: 
  https://www.healthaffairs.org/doi/10.1377/hlthaff.2024.00469 

• To view the Health Affairs’ study on these projections, you can do so at: https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2024.00469