After spiking during pandemic, health spending expected to slow to rate of inflation
Actuaries project 4.6% spending growth in 2022, or about $4.5 trillion.
After increasing by nearly 10% during the pandemic, U.S. health care spending is expected to grow by about the rate of inflation over the rest of this decade.
National health spending surged 9.7% in 2020, rising from $3.8 trillion in 2019 to $4.1 trillion in 2020, according to a study reported in Health Affairs. Spending growth was projected to drop to less than half of that, 4.2% or about $4.3 trillion, in 2021. Actuaries project 4.6% spending growth in 2022, or about $4.5 trillion.
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“For 2025 to 2030, it is expected that more traditional factors that typically drive changes in health spending and enrollment, such as economic, demographic and health-specific factors, will once more play the most influential roles in shaping health sector trends,” the report said. “During this period, health spending is projected to grow 5.3% per year, on average, which is faster than projected nominal GDP growth of 4.1% per year. Ultimately, by 2030 the health spending share of GDP is projected to reach 19.6%.”
Despite the easing of the pandemic, costs are expected to continue to rise:
- For those on private health insurance plans, per-enrollee spending dropped nearly half a percent in 2020 before rising by a projected 5.5% in 2021. The report projects an 8.3% jump in 2022 and 7.2% increase in 2023.
- Per-enrollee spending on Medicare was projected to jump 9.4% in 2021, 5.1% in 2022 and 3.3% in 2023. Per-enrollee spending on Medicaid was projected to increase 2% in 2021, 6.7% in 2022 and 6% in 2023.
- Out-of-pocket spending dropped by 3.7% in 2020, but projections show it jumping 4.6% in 2021 and 6.1% in 2022.
“The health spending trends projected for the next few years are associated with reductions in federal pandemic funding after critical early needs; costs associated with COVID-19 testing and treatment that fluctuate with emerging variants; vaccine development and deployment; initial shocks to the supply of and demand for health care services and goods, followed by varying mitigation measures as supply and demand rebound; economic effects on employment and related insurance coverage; and incentives associated with Medicaid and Marketplace coverage tied to the timing of the public health emergency, all of which are projected to dissipate by roughly 2024,” the report said.
At that time, economic and demographic factors are expected to reemerge as the most influential drivers of health sector trends, resulting in more stable health spending trends and a slowly increasing share of the economy devoted to health care.
“However, this outlook is contingent on a virus that has evolved and surprised at every turn — and could do so again,” the report concluded. “So although a normalization of health spending and the economy underlie this projection, only time will tell how normal the next decade is.”
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