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 * CMS Office of The Actuary Releases 2021-2030 Projections of National Health
   Expenditures

Press Releases Mar 28, 2022


CMS OFFICE OF THE ACTUARY RELEASES 2021-2030 PROJECTIONS OF NATIONAL HEALTH
EXPENDITURES



Affordable Care Act
Medicaid & CHIP
Medicare Part C
Medicare Part D
Medicare Parts A & B

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Today, the Centers for Medicare & Medicaid Services (CMS) released the 2021-2030
National Health Expenditure (NHE) report, prepared by the CMS Office of the
Actuary, that presents health spending and enrollment projections for the coming
decade. The report notably shows that despite the increased demand for patient
care in 2021, the growth in national health spending is estimated to have slowed
to 4.2%, from 9.7% in 2020, as supplemental funding for public health activity
and other federal programs, specifically those associated with the COVID-19
pandemic, declined significantly.

The NHE has been published annually since 1960, and is often referred to as the
“official” estimates of U.S. health spending. 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.), type of payer (private health insurance, Medicare,
Medicaid, etc.), and type of sponsor (businesses, households and federal/state
governments). The NHE report also includes spending on government public health,
investment in structures and equipment, and noncommercial research, as well as
information on insurance enrollment and uninsured estimates.

The report finds that annual growth in national health spending is expected to
average 5.1% over 2021-2030, and to reach nearly $6.8 trillion by 2030. Growth
in the nation’s Gross Domestic Product (GDP) is also projected to be 5.1%
annually over the same period. As a result of the comparable projected rates of
growth, the health share of GDP is expected to be 19.6% in 2030, nearly the same
as the 2020 share of 19.7%.

Near-term expected trends in health spending and insurance enrollments are
significantly influenced by the COVID-19 public health emergency (PHE). In 2021,
spending for other federal programs and public health activity (the NHE Accounts
categories that include the federal COVID-19 supplemental funding) 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.

The average annual growth in national health spending over the latter half of
the next decade (2025-2030) is projected to be 5.3% and is expected to be driven
primarily by more traditional elements, including economic, demographic, and
health-specific factors. During this time, upward pressure on spending growth
for Medicaid is expected, in part due to the expiration of Disproportionate
Share Hospital payment cap reductions statutorily scheduled to end in 2027.
Conversely, downward pressure on spending growth is expected for Medicare
(related to the end of the Baby Boomers’ enrollments), as well as for private
health insurance and out-of-pocket spending in lagged response to slowing income
growth earlier in the period.

The percentage of the population with health insurance is expected to be 91.1%
in 2021 and 2022 (mainly due to gains in Medicaid enrollment that are, in large
part, due to special rules in effect only during the COVID-19 PHE). After the
end of the COVID-19 PHE, enrollments are projected to begin returning to
pre-pandemic distributions.  The 2030 insured rate is projected to be 89.8%.

Selected highlights in national health expenditures by major payer include:

Medicare: Medicare spending growth is projected to average 7.2% over 2021-2030,
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.

Medicaid: 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 2025-2030, 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.

Private Health Insurance and Out-of-Pocket: For 2021-2030, 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 2025-2030, 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).

Selected highlights in projected health expenditures for the three largest goods
and services categories are as follows:

Hospital:  Hospital spending growth is projected to average 5.7% for 2021-2030.
In 2021, hospital spending growth is expected to be 5.7%, a deceleration from
6.4% in 2020, largely due to declining federal supplemental payments.  However,
growth in hospital spending for Medicare, Medicaid, and private health insurance
are expected to have grown faster compared to 2020 due to a partial rebound in
utilization. Demand for care is expected to remain elevated in 2022, along with
a projected acceleration in price growth; as a result, hospital spending growth
is likewise expected to accelerate to 6.9% in 2022. Over 2023 and 2024, growth
is expected to normalize (5.6% per year) and transition away from
pandemic-related impacts on utilization, federal program funding, and changes in
insurance enrollment, and remain similar on average through 2030 (5.5% per
year). Key factors influencing hospital spending growth over 2025-30 is faster
projected growth in Medicaid spending due to the scheduled expiration of
Disproportionate Share Hospital payment cap reductions, as well as slower
expected growth in Medicare spending (slower enrollment growth and larger
sequestration-based cuts) and private health insurance spending (in lagged
response to slowing income growth).

Physician and Clinical Services: Physician and clinical services spending is
projected to grow an average of 5.6% per year over 2021-2030. In 2021, growth in
physician and clinical services spending is expected be 5.1%, which is slower
than growth of 5.4% in 2020, mainly due to declines in supplemental funding more
than offsetting expected utilization increases among Medicare and private health
insurance enrollees. Consumers are expected to return to more typical use
patterns in 2022 resulting in 6.2% growth. Pandemic-related effects are expected
to diminish through 2024. Through 2030, average total physician and clinical
services spending growth of 5.5% is expected to primarily reflect decelerating
spending growth for private health insurance enrollees in lagged response to
projected slower growth in incomes earlier in the period.

Retail Prescription Drugs:  Spending growth for retail prescription drugs is
projected to increase over 2021-2030 at an average rate of 5%. In 2021, growth
is expected to accelerate (4.7%) compared to 2020 (3%) due to faster growth in
utilization by Medicaid beneficiaries and those enrolled in private health
insurance. In 2022, however, overall retail prescription drug spending growth is
projected to slow to 4.3%, as declines in Medicaid enrollment are expected to
lead to slower drug spending for that program and more than offset faster
Medicare spending for drugs in that year. New drugs expected to be approved from
2021-2026 are expected to influence retail prescription drug spending
utilization and prices over the remainder of the projection period; over
2025-2030, retail prescription drug spending growth is anticipated to average
5.2%.

The Office of the Actuary’s report will appear at:
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html

An article about the study is also being published by Health Affairs and is
available here:

https://www.healthaffairs.org/

###

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