A new report prepared by the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary finds that despite increased demand for patient care in 2021, the growth in national health spending slowed as supplemental funding for public health activity and other federal programs associated with the pandemic declined significantly.

CMS on Monday announced the release of the 2021-2030 National Health Expenditure (NHE) report, which showed slower projected national health spending growth after the rapid 2020 growth associated with the COVID-19 pandemic. Analysts estimate the growth in national health spending to have slowed to 4.2 percent from 9.7 percent in 2020.

The report finds that annual growth in national health spending will average 5.1 percent over 2021-2030 and will reach $6.8 trillion by 2030. Researchers expect growth in the nation’s Gross Domestic Product (GDP) to be 5.1 percent annually over the same period. As a result of the comparable projected rates of growth, CMS expects the health share of GDP to be 19.6 percent in 2030, the same as the 2020 share of 19.7 percent.

Among the key findings:

The COVID-19 public health emergency (PHE): The PHE has influenced trends in health spending and insurance enrollments. CMS said that in 2021, spending for other federal programs and public health activity declined from $417.6 billion in 2020 to $286.8 billion. Analysts expected health care utilization to rebound starting in 2021 and then normalize through 2024. As COVID-19 federal supplemental funding drops between 2021 and 2024, the government’s share of national health spending will fall to 46 percent by 2024, down from an all-time high of 51 percent in 2020.

The report finds the percentage of the population with health insurance to be 91.1 percent in 2021 and 2022 (due to gains in Medicaid enrollment that are, in large part, due to special rules in effect only during the COVID-19 PHE). After the end of the COVID-19 PHE, analysts expect enrollments to begin returning to pre-pandemic distributions. CMS expects the 2030 insured rate to be 89.8 percent.

Medicare: The report projects Medicare spending growth to average 7.2 percent over 2021-2030, the fastest rate among the major payers. CMS said it expects projected spending growth of 11.3 percent in 2021 due to acceleration in utilization growth but will slow in 2022 to 7.5 percent based on more moderate growth in use, as well as lower fee-for-service payment rate updates and the phasing in of sequestration cuts. Analysts expect spending to exceed $1 trillion for the first time in 2023. By 2030, Medicare spending growth will slow to 4.3 percent as the Baby Boomers are no longer enrolling and as further increases in sequestration cuts occur.

Medicaid: The report projects Medicaid spending will have an average annual growth of 5.6 percent for 2021-2030. Analysts expect Medicaid spending growth to accelerate to 10.4 percent in 2021, associated with rapid gains in enrollment. Over 2022 and 2023, Medicaid spending growth will likely slow to 5.7 percent and 2.7 percent respectively, due to projected enrollment declines, after the end of the COVID-19 PHE, when the continuous enrollment condition under the Families First Coronavirus Response Act expires and states begin to disenroll beneficiaries no longer eligible for Medicaid. Over 2025-2030, analysts predict spending growth to increase an average 5.6 percent, in part due to the expiration of Disproportionate Share Hospital payment cap reductions set for late-2027. They expect spending to exceed $1 trillion for the first time in 2028.

Private Health Insurance and out-of-pocket: The report finds for 2021-2030, private health insurance spending growth will average 5.7 percent. Analysts expect a rebound in utilization to primarily influence private health insurance spending growth over 2021 (6.3 percent) and 2022 (8.3 percent) and then normalize through 2024. Private payers’ health care spending trends are influenced on a lagged basis by changes in income growth, according to the report. As a result, over 2025-2030, analysts expect average growth for private health insurance spending to slow to 4.8 percent by 2030 in response to slowing income growth earlier in the projection period. Out-of-pocket expenditures will grow at an average rate of 4.6 percent over 2021-2030 and to represent 9 percent of total spending by 2030 (falling from its current historic low of 9.4 percent in 2020).

For more information, see the Office of the Actuary’s report and an article about the study in Health Affairs.