- On June 17, 2024
The Centers for Medicare and Medicaid Services (CMS) Office of the Actuary just released its projections of national health expenditures (NHE) and health insurance enrollment for the years 2023-2032. This data is published annually and is often referred to as the “official” estimates of health insurance enrollment and national health spending.
In 2023, 93.1% of Americans were insured (a record high), and the NHE grew by 7.5%. Health spending grew faster than the 6.1% annual growth in the gross domestic product (GDP) growth of 6.1%. According to CMS, this high rate of spending reflects the high usage of medical care by the insured population. The 93.1% insured rate is attributable to record-high Medicaid enrollment and gains in private coverage enrollment. Healthcare price inflation was modest during 2023 at 2.5%, but still slightly higher than the period immediately before the COVID-19 Public Health Emergency (PHE).
In addition to releasing health spending data for 2023, the report also contains spending projections for the next ten years. The Office of the Actuary projects that over 2023-2032, average annual growth in NHE (5.6%) will outpace average GDP growth (4.3%), resulting in an increase in the health spending share of GDP from 17.3% in 2022 to 19.7% in 2032. Put another way, federal healthcare spending, personal healthcare price inflation, and growth in healthcare services and goods will grow at a faster rate (5.6%) than the rest of the economy (4.1%).
Some other notable data and insights from the report include:
Private Health Insurance: The average growth rate for private health insurance spending over 2023-2032 is projected to be 5.6%. Private health insurance enrollment is expected to rise through 2025, partly due to the temporary extension of enhanced Marketplace subsidies. Enrollment is projected to fall in 2026 when the enhanced subsidies expire under current law.
Out-of-Pocket Costs: The growth rate for out-of-pocket medical spending is projected to average 4.7% from 2023 to 2032. The actuaries project slightly lower spending than in other periods because of changes to Medicare, including 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 Medicare’s new price negotiation authority.
Hospital: For 2023-2032, an average spending growth rate of 5.7% is expected for hospital costs. In 2023, hospital spending growth accelerated for nearly all payers because of increased use.
Physician and Clinical Services: For 2023-2032, the average annual growth rate for spending is projected to be 5.6%, commensurate with the average growth in overall NHE.
Retail Prescription Drug: Average annual growth in retail prescription drug spending of 6.0% is expected over 2023-2032. The impact of new drug introductions, particularly for oncology, immunology, and diabetes, is expected to raise drug costs for all payers. The reason the number is not higher reflects projected reductions in Medicare drug costs. The program is expected to incur savings from manufacturer discounts and price negotiations that will be partially offset by higher costs from the $2,000 cap on Part D out-of-pocket spending.
Medicare: Average annual Medicare expenditure growth is projected to be 7.4% from 2023 to 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 growth rate for Medicaid spending is projected to be 5.2%. State eligibility redeterminations resumed in 2023, and many individuals were disenrolled in 2023 (and more in 2024). After 2024, Medicaid enrollment is expected to stabilize as eligibility processes return to normal.