Hospital spending is projected to grow 5.7% a year
Because of increasing use of hospital services, growth also accelerated in 2023 for nearly all payers, says Office of the Actuary.
Photo: Issarawat Tattlong/Getty Images
Over the next eight years, hospital spending is expected to grow at an average rate of 5.7% a year, according to 2023-2032 National Health Expenditure Projections released by the Centers for Medicare and Medicaid Services.
In 2023, hospital spending growth accelerated for nearly all payers because of increasing use.
Hospital spending is expected to have grown 10.1% in 2023, which is substantially higher than 2022's 2.2%, according to a 2023-2032 projections report in Health Affairs.
Physician and clinical-services spending growth is projected to have reached a peak of 8.4% percent in 2023 (compared with 2.7% in 2022) and to average 5.6% growth over 2023–32, Health Affairs said.
Medicare prescription drug spending growth is being pushed lower by the Inflation Reduction Act'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 CMS report said.
Among the major payers, Medicare spending is expected to grow the fastest over the course of 2023–32 (7.4% average), mainly because of the program's projected enrollment growth rate of 2%. This is expected to last until 2029, when the last of the baby boomers (those born between 1946 and 1964) sign up for Medicare.
Medicaid enrollment is expected to stabilize after 2024, when the eligibility process returns to normal following the expiration of the continuous enrollment provision in 2023.
Despite the expected decline in Medicaid enrollment, the insured share of the population is expected to decline by just 0.4 percentage points, to 92.7 in 2024. This will be influenced by overlapping sources in coverage for people who no longer qualify for Medicaid and gains in private health insurance and Marketplace plans, Health Affairs said.
The insured share of the population is expected to remain above 90% through 2032.
Private health insurance enrollment growth of 2.9% is related to an increase of 10.4% in direct-purchase plans, due to the IRA's extension of enhanced marketplace subsidies and the temporary special enrollment period.
Private health insurance spending is projected to grow 5.6% on average, Medicaid spending 5.2% and out-of-pocket spending 4.7%.
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 Inflation Reduction Act's negotiations.
Average annual growth in retail prescription drug spending of 6% is expected over 2023-2032. In 2025, Medicare spending growth on drugs is expected to slow, followed by higher projected growth in 2026 from expected reductions in rebates on drugs with negotiated prices.
The NHE is published annually.
The Health Affairs study will also appear in the July 2024 issue.
"The earlier years of the projection period are expected to reflect divergent trends in spending and enrollment patterns as the health sector transitions away from pandemic-related policy effects," said Jacqueline A. Fiore, an economist in the Office of the Actuary and lead author of the Health Affairs study.
Email the writer: SMorse@himss.org
