National Health Expenditures Projected to Exceed $5 Trillion in 2024

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National Health Expenditures Projected to Exceed $5 Trillion in 2024

Performing procedures in surgery centers would save the system billions

The Centers for Medicare & Medicaid Services' (CMS) Office of the Actuary recently released annually updated projections of National Health Expenditures (NHE) for the years 2023–2032. The NHE data is the most comprehensive analysis of overall healthcare spending in the US, with historical data and projections broken down by types of health services delivered (hospital care, physician services, prescription drugs, etc.) as well as payer (Medicare, private health insurance, out-of-pocket spending, etc.).

CMS estimates that in 2022, the US spent $4.46 trillion on healthcare, including $3.2 trillion in spending by health insurers and $471 billion in out-of-pocket payments. This represents a 4.1 percent increase in health spending over 2021 ($4.29 trillion). Health spending is projected to grow at an average rate of 5.6 percent from 2023 to 2032, a rate that will outpace average annual growth of gross domestic product (GDP), which is expected to grow at 4.3 percent over the same period. Consequently, health spending, which represented 17.3 percent of GDP in 2022, is projected to represent 19.7 percent of GDP in 2032. NHEs are expected to exceed $5 trillion for the first time in 2024, rising to $7.7 trillion by 2032.

According to the Medicare Payment Advisory Commission’s (MedPAC) March 2024 Report, Medicare fee-for-service (FFS) spending on ambulatory surgical center services in 2022 was about $6.1 billion. This represents roughly 0.65 percent of overall Medicare spending—$944 billion—in 2022. CMS projects that overall Medicare spending alone will reach $1.94 trillion by 2032, which would correspond to roughly $12.5 billion in payments to ASCs, if current proportions stay consistent. Medicaid spending, which totaled $805 billion in 2022, is projected to rise to $1.3 trillion by 2032.

In 2022, year-over-year spending growth on hospital care actually slowed, only rising 2.2 percent to $1.36 trillion. Since 2016, the growth of hospital spending has averaged 5.1 percent year-over-year. However, CMS notes that hospital spending is expected to accelerate substantially, with a 10.1 percent spending growth projected for 2023. Overall, hospital spending is projected to grow by 5.6 percent from 2027 to 2033. The fluctuations in hospital spending are due to declines consistent with expected Medicaid disenrollments and the last of the baby boomers enrolling in Medicare over the upcoming years. Physician services spending also slowed in pandemic years and is expected to rebound in future years. From 2025 to 2031, physician services spending growth is projected to average 5.6 percent.

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. In an October 2020 analysis, KNG Health Consulting looked at Medicare in particular and 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 has the potential to save Medicare almost $3 billion between 2020 and 2028. An ASCA analysis of Medicare claims data estimated that ASCs saved the program $5.3 billion in 2022, including $1.9 billion due to performance of ophthalmology services alone.

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 in Health Affairs breaking down the NHE projections, and has posted the full data and methodology behind the projections.

Write Alex Taira with any questions.