National Health Expenditures (Statistics)
The Centers for Medicare &
Medicaid Services (CMS) Office of the Actuary released National Health
Expenditure (NHE) projections and health insurance enrollment for 2022-2031.
The report contains expected impacts from the Inflation Reduction Act (IRA),
including that people with Medicare prescription drug coverage (Part D) are
projected to experience lower out-of-pocket spending on prescription drugs for
2024 and beyond as several provisions from the law begin to take effect (CMS,
2023).
CMS projects that over 2022-2031, average annual growth in NHE
(5.4%) will outpace average annual growth in gross domestic product (GDP)
(4.6%), resulting in an increase in the health spending share of GDP from 18.3%
in 2021 to 19.6% in 2031. The insured percentage of the population is projected
to have reached a historic high of 92.3% in 2022 (due to high Medicaid
enrollment and gains in Marketplace coverage). It is expected to remain at that
rate through 2023. Given the expiration of the Medicaid continuous
enrollment condition on March 31, 2023, and the resumption of Medicaid
redeterminations, Medicaid enrollment is projected to fall over 2023-2025, most
notably in 2024, with an expected net loss in enrollment of 8 million
beneficiaries. If current law provisions in the Affordable Care Act are allowed
to expire at the end of 2025, the insured share of the population is projected
to be 91.2%. In 2031, the insured share of the population is projected to
be 90.5%, similar to pre-pandemic levels (CMS, 2023).
The NHE is published annually and is
often called the “official” estimate of U.S. health spending and health
insurance enrollment. The historical
and projected estimates of NHE measure total annual U.S. spending for the
delivery of health care goods and services by type of good or service
(hospital, physician, prescription drugs, etc.) and by payer (private health
insurance (PHI), Medicare, Medicaid, etc.)(CMS, 2023).
Selected highlights on the IRA, as well as NHE spending by
major payers, include:
Inflation Reduction Act (IRA) on Medicare Part D Enrollees: Several
provisions from the IRA are expected to result in out-of-pocket savings for
individuals enrolled in Medicare Part D. Those include: i) limitations on
price increases for Part D drugs beginning in 2023, ii) elimination of the
cost-sharing requirement in the Part D catastrophic phase (typically 5%
beneficiary coinsurance) starting in 2024, iii) implementation of a $2,000
annual cap on out-of-pocket spending on drugs under Part D beginning in 2025,
and iv) reduced prices for certain high-cost drugs through negotiation
resulting in lower out-of-pocket payments beginning in 2026. These
provisions have notable effects on the growth rates for total out-of-pocket
spending for prescription drugs, which are projected to decline by 5.9% in
2024, 4.2% in 2025, and 0.2% in 2026 (CMS, 2023).
Medicare: Average annual expenditure growth of 7.5% is projected for
Medicare over 2022-2031. In 2022, the combination of fee-for-service
beneficiaries utilizing emergent hospital care at lower rates and the
reinstatement of payment rate cuts associated with the Medicare Sequester
Relief Act of 2022 resulted in slower Medicare spending growth of 4.8% (down
from 8.4% in 2021). In 2025, Medicare spending is projected to grow 8.9%,
reflecting the effect of the IRA’s cap ($2,000 in 2025) on out-of-pocket
spending for Part D enrollees and the associated shift in responsibility for
those payments that exceed the cap from the beneficiaries to the program.
Projected Medicare spending growth slows to 6.8% in 2030 and 2031, associated
with the IRA’s provisions related to drug price negotiations and inflation
rebates, as well as slower enrollment growth as the last of the demographic
cohort known as the baby boomer generation (those born between 1946-1964)
enrolls in 2029 (CMS, 2023).
Medicaid: On average, over 2022-2031, Medicaid expenditures are
projected to grow by 5.0%. With the end of the continuous enrollment
condition in 2023, Medicaid enrollment is projected to decline over 2023-2025,
with most of the net loss in enrollment (8 million) occurring in 2024 as states
resume annual Medicaid redeterminations. Medicaid
enrollment is expected to increase and average less than 1% through 2031, with
average expenditure growth of 5.6% over 2025-2031 (CMS, 2023).
Private Health Insurance: Over 2022-2031, private
health insurance spending growth is projected to average 5.4%. Despite faster
growth in private health insurance enrollment in 2022 (led by increases in
Marketplace enrollment related to the American Rescue Plan Act’s subsidies),
private health insurance expenditures are expected to have risen 3.0% (compared
to 5.8% in 2021) due to lower utilization growth, especially for hospital services.
Faster projected growth in utilization and healthcare prices in 2023 leads to a
7.7% increase in private health insurance spending. In 2026, private health
insurance spending is expected to be impacted by the expiration of enhanced
subsidies for Marketplace plans and the 10% decline for those enrolled in
directly-purchased insurance that year (CMS, 2023)
Selected
highlights in NHE for the three largest goods and services categories include:
Overview of Hospital Trends: Over 2022-2031, hospital
spending growth is expected to average 5.8% annually. In 2022, hospital
spending was projected to have increased by 0.8%, reflecting declines in PHI
and out-of-pocket spending and low growth for Medicare, as growth in the use of
hospital services slowed from higher rates in 2021. In 2023, faster hospital
utilization rates and accelerating growth in hospital prices (related to
economywide inflation and rising labor costs) will lead to faster hospital
spending growth of 9.3%. For 2025-2031, hospital spending trends are
expected to normalize (with projected average annual growth of 6.1%) as there
is a transition away from pandemic public health emergency funding impacts on
spending (CMS, 2023).
Overview of Physician and Clinical Services Trends: Growth in physician and
clinical services spending is projected to average 5.3% over 2022-2031. An
expected deceleration in growth in 2022, to 2.4% from 5.6% in 2021, reflects
slowing growth in the use of services following the pandemic-driven rebound in
use in 2021. For 2025-2031, average spending growth for physician and clinical
services is projected to be 5.7%, with an expectation that average Medicare
spending growth (8.1%) for these services will exceed that of average Private
Health Insurance growth (4.6%) partly as a result of comparatively faster
growth in Medicare enrollment (CMS, 2023).
Overview of Retail Prescription Drugs Trends: Total expenditures for
retail prescription drugs are projected to grow at an average annual rate of
4.6% over 2022-2031. Drug spending growth is projected to have slowed from 7.8%
in 2021 to 5.1% in 2022, partly due to a decline in private health insurance
spending, particularly on newly introduced drugs. Expenditure growth for
prescription drugs in 2024 (3.7%) is similar to 2023 (3.6%). It reflects the
net impacts from: i) the elimination of 5% coinsurance in the catastrophic
phase in Part D, lowering out-of-pocket spending), ii) higher Medicare spending
as the program absorbs a portion of out-of-pocket costs formerly paid by
beneficiaries, and iii) a decline in Medicaid prescription drug spending due to
8 million in net enrollment losses. For 2025-2031, total spending growth on
prescription drugs is projected to average 4.8%, reflecting the net effects of
key IRA provisions: i) Part D benefit enhancements (putting upward pressure on
Medicare spending growth) and ii) price negotiations/inflation rebates (putting
downward pressure on Medicare and out-of-pocket spending growth) (CMS, 2023).
References
The
Office of the Actuary’s 2022-2031 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’ Office of the Actuary is available
here: https://www.healthaffairs.org/. To
view the Health Affairs’ study on these projections, you can do so at: https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2023.00403.
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