Government report projects medical expenses will continue to rise
January 12, 2024
Source: CMS, NHE Tables 1 and 16. LINK
2023 and following years are projections.
The Centers for Medicare and Medicaid Services released its report on total health care expenditures for 2022 and projections for health care expenditures through 2032 last month. Here are some headlines regarding private insurance.
Private health insurance (employer-sponsored and marketplace plans) medical spending grew 5.9% to $1.3 trillion in 2022 and is projected to grow to $2.1 trillion in 2031. Private health insurance is 29% of total national health expenditure and is projected to be 30% in 2031.
Hospital expenditures increased by 2.2% in 2022, and professional expenditures increased by 3.7%. Both increases were less than 2021, where costs increased dramatically after many services were not delivered in 2020 due to the pandemic. Hospital and professional expenditures are each projected to increase between 5-6% each year through 2031.
Pharmacy costs went up 8.4% in 2022. I was surprised to see projections of pharmacy cost increases that were lower than overall medical cost increases from 2024-2031. The combination of cell and gene therapies and increased use of GLP-1 anti-obesity drugs makes me worried that we will overshoot this projection, although increased competition could lower the cost per person of GLP-1 drugs.
Total portion of gross domestic product spent on health care is 18% in 2022, and is projected to rise to 20% by 2031
Implications for employers:
Health care costs for employer sponsored health insurance are projected to continue to rise through 2031.
This points to the continuing need for employers to evaluate opportunities to address health care costs today.
There are many opportunities to lower costs. Clinical waste is estimated to represent between 5 and 16% of all health care spending.
Here’s a link to the Cost Savings Playbook from a bit over a year ago that presents a structured way to identify opportunities based on client needs.
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Monday: FDA approves Florida’s plan to import drugs from Canada: Implications for employers