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National Health Expenditures Projected to Exceed $7 Trillion by 2031

Migrating cases to ASCs would save the healthcare system billions

BY ALEX TAIRA | JULY 2023

The Centers for Medicare & Medicaid Services (CMS) Office of the Actuary recently released updated projections for national health expenditures (NHE) and health insurance enrollment in the US over the next decade. The projections predict that NHE will grow at an average pace of 5.4 percent from 2022 to 2031, a rate that will outpace growth of gross domestic product (GDP), which is expected to grow at 4.6 percent over the same period. Consequently, health spending, which represented 17.4 percent of GDP in 2022, will represent 19.6 percent of GDP by 2031. The projections mark Medicare to be the fastest growing payer over the next 10 years, with an average growth rate of 7.5 percent per year.

In 2020, Medicare spending for ASCs was about $5 billion or about 0.05 percent of total Medicare spending. In 2021, Medicare spending was roughly $900 billion and is expected to reach a whopping $1.85 trillion by 2031. While hospital spending growth slowed considerably—from 4.4 percent in 2021 to 0.8 percent in 2022—CMS attributes the decrease to mainly pandemic-related reasons, such as staffing issues and temporary spending from third-party programs like the COVID-19 Provider Relief Fund. Hospital spending growth is expected to accelerate significantly over the next decade, with a projected 9.3 percent growth rate in 2023 largely due to rising labor costs. Physician services spending also slowed in pandemic years and is expected to rebound in future years. From 2025 to 2031, physician spending growth is projected to average 5.7 percent, mostly driven by Medicare spending.

ASCA has consistently advocated for increased use of ASCs as a mechanism to reduce health spending. For appropriately selected patients, ASCs represent a considerably cost-effective and efficient site of service for many outpatient surgical procedures. An October 2020 analysis conducted by KNG Health Consulting that looked at Medicare in particular found that ASCs generated an estimated $28.7 billion in savings for the program between 2011 and 2018. The analysis projected Medicare savings due to performance of procedures in ASCs rather than hospitals at $73.4 billion between 2019 and 2028. And performance of total knee arthroplasty alone on Medicare beneficiaries has the potential to save Medicare almost $3 billion between 2020 and 2028. Commonsense solutions, like those found in the pending Outpatient Surgery Quality and Access Act of 2023, will encourage the migration of appropriate procedures to the lower-cost ASC setting.

CMS published a research article breaking down the NHE projections in Health Affairs, and has posted the full data and methodology behind the projections.

Write Alex Taira with any questions.