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Healthcare Spend Is Big, And Getting Bigger. Can VBC Make an Impact?

Analysis  |  By Marie DeFreitas  
   June 17, 2024

The healthcare expenditure forecast is outpacing just about everything.

Healthcare spending is soaring and is expected to climb even higher over the next eight years. But the impact will be felt in places other than the consumer’s wallet.

Two new reports: The CBO National Health Expenditure Forecast to 2032, and The Bureau of Labor Statistics CPI Report for May 2024 and Last 12 Months (May 2023-May2024) are predicting significant increases in healthcare spending through 2032.

According to the CBO, which forecasts major increases from 2024 to 2032, the National Health Expenditure is expected to increase a whopping 52.6%, jumping from $5.048 trillion to $7,705 trillion, claiming 17.6% of the GDP. The NHE/Capita will increase 45.6%, taking it from $15,054 in 2024, to $21,927 in 2032.

Other major categories will also see a big jump: Physician services spending is expected to increase 51.2%, making up 19.7% of total NHE, and hospital spending also will accelerate to 51.6%, jumping to 30.7% of total NHE.

Two other categories are also set to jump: Prescription drug spending and net cost of insurance. Prescription drug spending will increase 57.1%, taking it to $728.5 billion, while the net cost of insurance will increase 62.9%, escalating it to $534.7 billion.

Medical services, which increased 3.1%, represent about 6.5% of the overall Consumer Price Index, but there is much variance among spending categories. Notably, hospital and over-the-counter prices exceeded the overall CPI. Hospital services were at 7.3% over the last year, (1.0% of the CPI total), and OTC prices were at 5.9%.

What does it all mean for the industry?

While the healthcare economy is large, and only expected to get larger, Paul Keckley notes that, outside of OTC products, consumers aren’t the ones who will notice the increase of expenses. Employers and state and federal governments who fund the majority of healthcare spending will feel the brunt of these increases.

Hospitals and physician services are expected to remain the same, he says, but prescription drugs and health insurance will increase. As these increases draw in more attention to price control methods, tensions between payers and providers will likely rise. These two parties will need to pace towards innovative price control practices to smoothen out negotiations around spending.

According to Keckley, there isn’t much to indicate that value-based care has lowered spending in any notable way, nor is it considered significant in these forecasts.

For value-based care to truly have an impact on healthcare spending, hospital executives and payers will need to work together to examine what types of value-based care models will create an impact specific to their organization. And while this type of care is fondly spoken about among health executives, implementation will require strategic plans in order to be beneficial to the industry.

As healthcare spending expands above the GDP, population growth rates, and overall inflation, Keckley says it may not be sustainable.

 “Its long-term sustainability is in question unless monetary policies enable other industries to grow proportionately and/or taxpayers agree to pay more for its services. These data confirm its unit costs and prices are problematic,” Keckley says.

Marie DeFreitas is the finance editor for HealthLeaders.


Healthcare spending is expected to jump more than 50% by 2032, according to new forecasts.

Physician services and hospital spending are two major spending categories.

Value-based care isn’t cutting costs as much as the industry has hoped.

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