Pandemic slowed health spending, CMS says

WASHINGTON – The growth in national health spending is estimated to have slowed to 4.2% in 2021, down from 9.7% in 2020, despite increased demand for patient care, according to CMS’s 2021-2030 National Health Expenditures Report. 

The annual growth in national health spending is expected to average 5.1% over 2021-30 and to reach nearly $6.8 trillion by 2030, the report states. 

Additionally, the health share of the nation’s gross domestic product (GDP) is expected to be 19.6% in 2030, nearly the same as 19.7% in 2020, according to the report. 

“Near-term expected trends in health spending and insurance enrollments are significantly influenced by the COVID-19 public health emergency (PHE),” the report states. “In 2021, spending for other federal programs and public health activity is expected to have declined from $417.6 billion in 2020 to $286.8 billion. Additionally, following the declines observed in 2020, health care utilization is expected to rebound starting in 2021 and then normalize through 2024. As COVID-19 federal supplemental funding is expected to wane between 2021 and 2024, the government’s share of national health spending is expected to fall to 46% by 2024, down from an all-time high of 51% in 2020.” 

Other highlights from the report, which is prepared by the CMS Office of the Actuary: 

• Medicare spending growth is projected to average 7.2% over 2021-30, the fastest rate among the major payers. Projected spending growth of 11.3% in 2021 is expected to be mainly influenced by an assumed acceleration in utilization growth, while growth in 2022 of 7.5% is expected to reflect more moderate growth in use, as well as lower fee-for-service payment rate updates and the phasing in of sequestration cuts. Spending is projected to exceed $1 trillion for the first time in 2023. By 2030, Medicare spending growth is expected to slow to 4.3% as the Baby Boomers are no longer enrolling and as further increases in sequestration cuts occur. 
• Average annual growth of 5.6% is projected for Medicaid spending for 2021-2030. Medicaid spending growth is expected to have accelerated to 10.4% in 2021, associated with rapid gains in enrollment. Over 2022 and 2023, Medicaid spending growth is expected to slow to 5.7% and 2.7%, respectively, as a result of projected enrollment declines, after the end of the COVID-19 PHE, when the continuous enrollment condition under the Families First Coronavirus Response Act expires and states begin to disenroll beneficiaries no longer eligible for Medicaid. Over 2025-30, spending growth is projected to increase an average 5.6%, in part due to the expiration of Disproportionate Share Hospital payment cap reductions set for late-2027. Spending is projected to exceed $1 trillion for the first time in 2028. 
• For 2021-30, private health insurance spending growth is projected to average 5.7%. A rebound in utilization is expected to primarily influence private health insurance spending growth over 2021 (6.3%) and 2022 (8.3%), and then normalize through 2024. Over 2025-30, as health spending trends by private payers tend to be influenced on a lagged basis by changes in income growth, average growth for private health insurance spending is then expected to slow to 4.8% by 2030 in response to slowing income growth earlier in the projection period. Out-of-pocket expenditures are projected to grow at an average rate of 4.6% over 2021-2030 and to represent 9% of total spending by 2030 (ultimately falling from its current historic low of 9.4% in 2020).