CMS: U.S. health spending slowed down in 2021

By Erik L. Ridley, staff writer

March 29, 2022 -- Despite higher demand for patient care, health spending in the U.S. grew at only 4.2% in 2021 to reach nearly $4.3 trillion, according to a new report from the U.S. Centers for Medicare and Medicaid Services (CMS).

In its 2021-2030 National Health Expenditure (NHE) annual report published on March 28, the CMS Office of the Actuary estimated that growth slowed from the 9.7% increase in national health spending in 2021. The decline was attributed to significant reductions in COVID-19-related supplemental funding for public health activity and other federal programs.

Overall, national health spending is expected to grow by an average of 5.1% each year to reach nearly $6.8 trillion in 2030. As a result, the health share of the U.S. gross domestic product is expected to be 19.6% in 2020, nearly the same as the 2020 share of 19.7%, according to the CMS.

Among major payers, Medicare will grow at the highest rate between 2021 and 2030, the CMS said.

"Projected spending growth of 11.3% in 2021 is expected to be mainly influenced by an assumed acceleration in utilization growth, while growth in 2022 of 7.5% is expected to reflect more moderate growth in use, as well as lower fee-for-service payment rate updates and the phasing in of sequestration cuts," the agency said.

However, Medicare spending growth will slow by 2030 to 4.3% as Baby Boomers will no longer be enrolling and further sequestration cuts occur, according to the CMS. In Medicaid, growth is expected to moderate as a result of projected enrollment declines and states disenrolling beneficiaries who are no longer eligible for Medicaid.

Projected growth trends in U.S. healthcare spending by payer
  2021 2022 2021-2030
Medicare spending growth 11.3% 7.5% 7.2%
Medicaid spending growth 10.4% 5.7% 5.6%
Private health insurance 6.3% 8.3% 5.7%
Hospital spending growth 5.7% 6.9% 5.7%
Physician and clinical services spending growth 5.1% 6.2% 5.6%
Retail prescription drug spending growth 4.7% 4.3% 5%

A rebound in healthcare utilization is expected to influence spending growth in private healthcare insurance over 2021 and 2022. Average annual growth in private healthcare insurance spending will drop to 4.8% by 2030 due to slowing income gains, according to the CMS.

In hospital spending, elevated demand for care and a projected acceleration in price growth is likely to lead to a higher growth rate -- 6.9% -- in 2022, the CMS said. However, growth is expected to normalize over 2023 and 2024, reflecting a transition away from pandemic-related effects on utilization, federal program funding, and insurance enrollment changes. Hospital spending growth is expected to remain similar on average through 2030.

Although declines in supplemental funding in 2021 more than offset expected utilization increases among Medicare and private health enrollees, consumers are expected to return to more typical use patterns resulting in 6.2% growth in physician and clinical services in 2022, according to the agency.

"Through 2030, average total physician and clinical services spending growth of 5.5% is expected to primarily reflect decelerating spending growth for private health insurance enrollees in lagged response to projected slower growth in incomes earlier in the period," the CMS said.

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