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Average annual growth in national health spending over the next decade projected by Office of the Actuary to be 5.6%





Centers for Medicare & Medicaid ServicesNewsroom




FOR IMMEDIATE RELEASE
June 12, 2024

Contact: CMS Media Relations
CMS Media Inquiries [ https://www.cms.gov/About-CMS/Public-Affairs/PressContacts/Media-inquiries1.html ]

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*CMS Releases 2023-2032 National Health Expenditure Projections*" "

"Average annual growth in national health spending over the next decade projected by Office of the Actuary to be 5.6%"

The Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary has released projections of National Health Expenditures (NHE) and health insurance enrollment for the years 2023-2032. The Office of the Actuary projects that over 2023-2032, average annual growth in NHE (5.6%) will outpace average annual growth in gross domestic product (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 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.

NHE growth is projected to average 5.6% over 2023-32. This 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). The high enrollment share in 2023 was related to record-high Medicaid enrollment and gains in direct-purchase insurance enrollment. Health care price growth remained modest during 2023 at 2.5% (as measured by the Personal Health Care Price Deflator). However, it was faster than the period immediately prior to the COVID-19 Public Health Emergency (PHE).

Over 2027-2032, personal health care price inflation and growth in the use of health care services and goods contribute to projected health spending that grows at a faster rate (5.6%) than the rest of the economy (4.1%).

The NHE is published annually and is often referred to as the “official” estimates 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.).

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.

*_Hospital_*: For 2023-2032, an average spending growth rate of 5.7% is expected. In 2023, hospital spending growth is projected to accelerate for nearly all payers because of increasing use.

*_Physician and Clinical Services_*: For 2023-2032, the average annual growth rate for spending is projected to be 5.6%, similar to average growth in overall NHE.

*_Retail Prescription Drug_*: Average annual growth in retail prescription drug spending of 6.0% is expected over 2023-2032.  In 2025, Medicare spending growth on drugs slows (as the program incurs savings from manufacturer discounts that are partially offset by higher costs from the $2,000 cap on Part D out-of-pocket spending), followed by higher projected growth in 2026 from expected reductions in rebates on drugs with negotiated prices. For 2027-32, Medicare prescription drug spending growth is pushed lower by the IRA’s negotiation and inflation rebate provisions. The impact of new drug introductions, particularly for oncology, immunology, and diabetes, is expected to put upward pressure on growth across all payers.

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- [ http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html ] Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html [ 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/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

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