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The US shells out so much cash for healthcare that it makes Jeff Bezos’s eccentric hobby budget seem like a paragon of restraint. And it looks like we’re only going to be spending more in the coming years.
With a record number of people insured and seeking healthcare services post-pandemic, US health spend growth is outpacing GDP growth, and is expected to keep doing so through 2032, according to a June 12 report from actuaries at the Centers for Medicare and Medicaid Services (CMS).
By 2032, CMS actuaries project healthcare spending will total $7.7 trillion and make up 19.7% of total US GDP, compared to $4.8 trillion and 17.6% of GDP in 2023.
Breaking it down
CMS actuaries estimate total US health spending grew 7.5% in 2023, due in part to the fact that an “unprecedented” 93.1% of the population was insured. That spike in coverage was largely thanks to federal policies allowing beneficiaries to stay on Medicaid through the public health emergency.
In comparison, nominal GDP grew 6.1%. This marks the first time health spend growth has outpaced GDP growth since 2020.
Between 2023 and 2032, CMS actuaries project the national health spend will grow by an average of 5.6% per year, while they say nominal GDP grows by 4.3% annually. That growth, the actuaries project in the report, will be driven in part by healthcare price inflation increasing faster than economy-wide price growth and more people using healthcare services as the population ages.
Medicare spending in particular is expected to grow at an average of 7.6% per year between 2027 and 2032 as the remaining baby boomers age into the program.
However, CMS does project that overall health spend growth will slow a bit to 5.2% this year as the number of Medicaid enrollees diminishes due to the redetermination process.
Yet, as more Medicaid beneficiaries are disenrolled from the program, the Medicaid spending growth rate per enrollee is expected to increase to 10.2% in 2024 compared to 5.2% in 2023—the largest increase since 1991. That’s because many who are being disenrolled are younger and healthier, “and thus less expensive,” the actuaries wrote.
These major spikes in health spending aren’t expected to last forever, they noted.
“As time passes, the Covid-19 pandemic and associated temporary spending and enrollment effects are expected to retreat, and health spending and enrollment patterns are expected to resemble their longer-term trends more closely and to be driven to a greater extent by traditional economic and demographic factors,” the actuaries wrote.