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March 30, 2022
David Burda
Economics Outcomes System Dynamics

$6.8 Trillion and Counting

The big healthcare story of the week, of course, was the latest national health expenditure projections released by CMS. The agency’s actuaries said national health spending will grow at an average annual rate of 5.1 percent starting in 2021 and hit nearly $6.8 trillion by 2030. That amount will represent 19.6 percent of the gross domestic product eight years from now.

I like to look through CMS’ NHE projection spreadsheets for anything unusual or different or that bucks conventional wisdom that would make for a good man-bites-dog news story or blog post. This week was no different, and I did find something. CMS’ projections are remarkable because they’re unremarkable.

Absolutely nothing jumps out at you as an out-of-control driver of national health spending that needs to be controlled if we want to bend the cost curve. Everything is going up 4 percent to 8 percent a year consistently over the next 10 years:

  • Hospital care? About 5.7 percent a year.
  • Physician and clinical services? About 5.6 percent a year.
  • Prescription drugs? About 5 percent a year.
  • Home care? About 6.4 percent a year.

Throw a dart at Table 2 and chances are you’ll hit something with a five in it.

The only aberration is 2020, when NHE jumped 9.7 percent because of government spending on the COVID-19 pandemic, according to CMS. But a year later, things were back to normal and will stay that way at least for another decade.

We like to say at 4sight Health that healthcare will change more in the next 10 years than it has in the past 100 years. I believe that to be true. But, maybe we should qualify that to say “healthcare delivery” will change because, at least according to CMS, healthcare spending won’t.

It’s possible that absent all the innovation in healthcare delivery going on that the fives on CMS’ Table 2 would all be 10s, and new care delivery models and advances in medical treatments and technology are halving what could have been double-digit healthcare inflation over the next 10 years.

It’s more likely that new care delivery models and advances in medical treatments and technology are as expensive if not more expensive than the old ones. Why? They’re better, and their owners and investors want a big return on their money. I pay more for a better car, better golf clubs, a better fishing pole or a meal at a better restaurant. Why shouldn’t I pay more for better healthcare?

And that’s the rub. Most of the innovation in care delivery happening right now isn’t trying to make care cheaper or more affordable. Some is. But most isn’t. There’s no money in no money. Until there is, there won’t be anything interesting to find on CMS’ healthcare spending spreadsheets.

Thanks for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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