National health spending should grow 4.2% for 2021, reaching nearly $4.3 trillion, according to estimates released Monday by the Office of the Actuary at the Centers for Medicare & Medicaid Services. National health spending could reach $6.8 trillion by 2030, the office estimates in its 10-year projections.
“The projections are for the entire health sector, so as of 2020, that represented about one-fifth of the total economy,” John Poisal, deputy director for National Health Statistics Group in CMS and first author of information published in the journal Health Affairs study, told the media at a briefing Monday morning.
The near-term outlook for national health was “heavily influenced” by the pandemic, he said.
National health spending is down from the 9.7% growth seen in 2020, which “was driven by large inflows of federal supplemental funding to mitigate the impacts of the COVID-19 pandemic on the health sector,” according to Monday’s press release. CMS predicts that national health spending growth will be approximately 4.9% and 5.3% for 2022-2024 and 2025–2030, respectively.
Spending growth is expected to moderate as pandemic impacts wane, according to the experts at CMS.
“While there is still considerable uncertainty around the COVID-19 pandemic, its related health and economic impacts are projected to lessen in the next few years,” Poisal said in a press release. “From 2025 onward, we expect economic and demographic factors to reemerge as the most influential drivers of health sector spending trends.”
National health spending is expected to grow at a slower rate than general economic growth in the early part of the projection period, “resulting in a drop in the health share of the economy from 19.7% in 2020 to 18.2% by 2022,” according to the Health Affairs article.
“The insured share of the population is expected to peak in 2022 at 91.1%, mostly attributable to recent Medicaid enrollment gains,” Poisal told the media.
For the latter half of the 10-year projection period, he said, growth rates in enrollment and spending are expected to be driven by economic, demographic and health-specific factors.
Trends in Medicare
Trends in Medicare over the latter half of the projection period for both enrollment and spending are expected to be influenced by demographic and regulatory factors.
Andrea M. Sisko, an economist at the Office of the Actuary, told the media that over the entire 10-year projection period, the average annual Medicare spending growth is expected to be 7.2%, “and that is the highest projected rate among the major payers. In 2021, an acceleration per enrollee spending growth compared to that in 2020 is mainly influenced by an assumed acceleration in utilization.”
This year and into 2024, she said, those numbers are expected to moderate.
“In addition, lower fee-for-service payment rate updates, as well as the phasing of sequestration cuts in 2022, also dampen overall spending growth,” Sisko said.
The economist said that Medicare spending is expected to exceed $1 trillion in 2023 for the first time. The second half of the projection period is expected to see spending more aligned with the program’s long-term averages.
Sisko noted that all baby boomers will be done enrolling in Medicare by 2030, the oldest members of that generation having first enrolled in in 2011. “In addition, the sequestration cuts are scheduled to increase,” she said. She said that as a result, Medicare spending is expected to see its lowest point in the second half of the projection period.
Growth in private health insurance spending is expected to slow during the second half of the projection period.
