Impact of coronavirus pandemic accelerated national health spending growth to 9.7% in 2020.
National health expenditures are expected to be influenced significantly by the coronavirus pandemic from 2021 to 2024, then typical factors that drive changes in health spending such as demographics are expected influence spending trends from 2025 to 2030, a new analysis indicates.
The new analysis was conducted by the Centers for Medicare & Medicaid Services’ Office of the Actuary. The analysis features expected annual health expenditures and projected hospital spending growth.
The analysis includes chronological healthcare expenditure projections.
- In 2020, unprecedented financial stimulus from the federal government and insurance market upheaval drove national health expenditure growth to a nearly two-decade high of 9.7%. In 2020, the health spending share of the gross domestic product (GDP) increased 2.1 percentage points from 2019, to 19.7%.
- In 2021, national health expenditure growth is expected to decline sharply to 4.2%, largely due to reductions in federal coronavirus relief funding. The slower growth rate in healthcare spending combined with growth in GDP, which rebounded to 9.6%, is expected to result in a 0.9-percentage point drop in the healthcare spending share of GDP to 18.8%. Healthcare spending is expected to total $4.3 trillion.
- In 2022, national health expenditures are expected to increase at 4.6%, driven in part by higher healthcare prices linked to inflation in the economy. Healthcare spending is expected to total $4.5 trillion.
- National health expenditures are expected to increase 5.0% and 5.1% in 2023 and 2024, respectively. These growth rates are tied to an expectation that patient care patterns will return to prepandemic levels. From 2022 to 2024, healthcare spending’s share of GDP is expected to be just over 18%.
- The healthcare spending impact of the pandemic is expected to wane progressively from 2021 to 2024.
- From 2025 to 2030, traditional drivers of healthcare system trends such as economic, demographic, and health-specific factors are expected to return to prominence. During this period, healthcare spending is expected to increase at an average rate of 5.3% annually, reaching a total annual spending level of $6.8 trillion by 2030. Healthcare spending’s share of GDP is expected to be 19.6% in 2030.
The analysis also includes projections for hospital spending growth.
- In 2021, hospital spending growth is expected to decline 0.7 percentage points to 5.7%. The primary reason for this drop in spending growth is a decrease in federal coronavirus relief funding. In 2021, total hospital expenditures are expected to reach $1.3 trillion.
- In 2022, rebounding demand for care and hospital price growth linked to inflation are expected to drive hospital spending growth upward sharply to 6.9%.
- In 2023 and 2024, hospital spending growth is projected to decrease to 5.6%, with a normalization of pandemic-related effects such as utilization, federal stimulus funding, and insurance market disruptions.
- From 2025 to 2030, hospital spending growth is expected to decrease slightly to an average of 5.5% annually. Influencing factors are expected to include reduced Medicare and private health insurance spending for hospitals.
Projections dependent on pandemic
The projections presented in the analysis are based on the assumption that the effects of the pandemic will wane through 2024, the co-authors of the analysis wrote. “As the severity of the COVID-19 pandemic and its related health and economic impacts are projected to lessen during the next few years, it is anticipated that the health spending and enrollment trends observed in 2020 will unwind as well.”
Traditional factors are expected to influence healthcare spending trends from 2025 to 2030, but there is considerable uncertainty associated with the pandemic, the co-authors wrote.
“Economic and demographic factors are anticipated to reemerge as the most influential drivers of health-sector trends, resulting in more stable health spending trends and a slowly increasing share of the economy devoted to healthcare. However, this outlook is contingent on a virus that has evolved and surprised at every turn—and could do so again. So although a normalization of health spending and the economy underlie this projection, only time will tell how normal the next decade is,” they wrote.
Christopher Cheney is the senior clinical care editor at HealthLeaders.
In 2021, national health expenditure growth is expected to decline sharply to 4.2%, largely due to reductions in federal coronavirus relief funding.
In 2022, national health expenditures are expected to increase at 4.6%, driven in part by higher healthcare prices linked to inflation in the economy.
In 2021, hospital spending growth is expected to decline 0.7 percentage points to 5.7%. The primary reason for this drop in spending growth is a decrease in federal coronavirus relief funding.