National health spending projected to grow 5.4% over the next decade
The United States will spend more than $7.1 trillion on health care in 2031, nearly 20 percent of the gross domestic product (GDP), according to the latest projections of the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary.
The report, released Wednesday, provides projections of the National Health Expenditures (NHE) and health insurance enrollment for the years 2022-2031. It covers expected impacts from the Inflation Reduction Act (IRA), including that people with Medicare prescription drug coverage (Part D) are projected to experience lower out-of-pocket spending on prescription drugs for 2024 and beyond as several provisions from the law begin to take effect.
The annual report measures 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, Medicare, Medicaid, etc.).
Among the highlights of this year’s report:
- The United States is projected to have spent $4.4 trillion on health care in 2022, a rate of national health spending growth of 4.3 percent.
- Heath spending over the course of 2022-2031 is projected to grow 5.4 percent per year on average.
- Average annual spending for Medicare is expected to grow 7.5 percent over 2022-2031. In 2025, Medicare spending is projected to grow 8.9 percent, reflecting the effect of the IRA’s cap ($2,000 in 2025) on out-of-pocket spending for Part D enrollees and the associated shift in responsibility for those payments that exceed the cap from the beneficiaries to the program. Projected Medicare spending growth slows to 6.8 percent in 2030 and 2031, associated with the IRA’s provisions related to drug price negotiations and inflation rebates, as well as slower enrollment growth as the last of the Baby Boomers enroll in 2029.
- Spending for Medicaid is expected to grow by 5.0 percent on average over 2022-2031. With the end of the continuous enrollment condition in 2023, Medicaid enrollment is projected to decline over 2023-2025, with most of the net loss in enrollment (8 million) occurring in 2024 as states resume annual Medicaid redeterminations. Medicaid enrollment is expected to increase and average less than 1 percent through 2031, with average expenditure growth of 5.6 percent over 2025-2031.
- Over 2022-2031, private health insurance spending growth is projected to average 5.4 percent. Despite faster growth in private health insurance enrollment in 2022 (led by increases in Marketplace enrollment related to the American Rescue Plan Act’s subsidies), private health insurance expenditures are expected to have risen 3.0 percent (compared to 5.8 percent in 2021) due to lower utilization growth, especially for hospital services. Faster projected growth in utilization and health care prices in 2023 leads to a 7.7 percent increase in private health insurance spending. In 2026, private health insurance spending is expected to be impacted by the expiration of enhanced subsidies for Marketplace plans and the associated 10 percent decline for those enrolled in directly purchased insurance that year.
ACA preventive care coverage to continue amid court battle
The preventive care provision under the Affordable Care Act will be allowed to continue while the case is being appealed. The 5th U.S. Circuit Court of Appeals approved an agreement between the Biden administration and the plaintiffs in the case, individuals and an employer in Texas who contend the preventive care requirement is unconstitutional and that coverage of HIV prevention treatment can violate an employer’s religious rights. They agreed to a broad stay nationwide. In return, during the appeal process, the handful of plaintiffs would be allowed to provide insurance plans that don’t include the preventive care, the Associated Press reported. Meanwhile, the case will continue to wind its way through the courts. The Biden administration is appealing U.S. District Judge Reed O’Connor’s March ruling declaring certain preventive services covered by the ACA as unconstitutional, a move that threatens the free coverage of preventive services for 150 million Americans.
HHS announces new tools to lower drug costs for low-income seniors, people with disabilities
The Department of Health and Human Services (HHS) has announced new tools to lower prescription drug costs for low-income people with Medicare through the Extra Help program, which provides eligible seniors and disabled people with help paying for their Medicare Part D premiums and cost-sharing. These resources complement forthcoming expansions in Extra Help benefits and will ensure more people eligible for benefits are enrolled in this vital program, HHS said.
The program expansion is made possible via the Inflation Reduction Act, which extends eligibility for the full low-income subsidy benefit—known as the Extra Help program—to individuals with limited resources and incomes up to 150% percent of the federal poverty level, or $21,870 per year. Nearly 300,000 low-income people with Medicare currently enrolled in the Extra Help program stand to benefit from the program’s expansion. People with Extra Help currently with partial benefits who will be newly eligible for full benefits will pay no deductible, no premium, fixed lower copayments for certain medications, and could save nearly $300 per year, on average, according to estimates.
Up to three million seniors and people with disabilities could benefit from the Extra Help program now but aren’t currently enrolled. The expansion of the Extra Help program provides an important opportunity to those who could benefit from the program’s lower cost premiums, deductibles, and copayments—now and when the program expands in 2024.
To reach eligible seniors and people with disabilities, HHS through the Administration for Community Living (ACL) and the Centers for Medicare & Medicaid Services (CMS), will take the following actions:
ACL will conduct targeted efforts to reach, screen, and enroll people in the Extra Help program, specifically focused on Americans living in rural and underserved communities.
CMS is releasing new national data on people with Medicare Part D prescription drug coverage living in the community who currently benefit from Extra Help, those who are expected to save more on prescription drug costs thanks to the program’s expansion in 2024, and those who are likely eligible for Extra Help but not enrolled. This data set includes key demographic information like age, gender, race and ethnicity, marital status, living alone, metro status, limited English proficiency, disability status, and other community characteristics.
CMS is making available an outreach toolkit for beneficiary advocates and community-based organizations to raise awareness of the Extra Help program’s benefits and how to enroll.