Why National Health Expenditures Keep Rising 

When actuaries from the Centers for Medicare and Medicaid Services (CMS) release their annual historic and projected figures on national health expenditures (NHEs), it’s always front-page news. It’s always big news because NHEs always go up. Either they go up a little slower than before or they go up a little faster than before.

Critics of the historic and projected NHE figures say CMS actuaries do little more than tweak their annual data based on a handful of standard social-economic variables like population growth, aging population, inflation, gross domestic product (GDP) percentages, etc. The actuaries don’t tweak them, say critics, for more subtle and more sophisticated variables like changing market dynamics, care delivery innovations, medical advances, commercialization of blockbuster drugs or breakthrough information technologies.

Maybe that’s true. But the fact is, NHEs continue to rise. Either a little slower than before or a little faster than before.

Look no further than last week’s release by CMS actuaries of their latest projections for NHEs. CMS said it estimates NHEs to rise to a projected $8.6 trillion by 2033 from a projected $5.6 trillion this year. That’s a 52.4% jump in just eight years, or an average of about 6.6% a year over that period. When they release their historic, or actual, figures for that same period, it may be a little less or a little more than projected.

Nothing, other than a deadly, once-in-a-century pandemic, knocked NHEs off their historic trend line by much. The big question is why? Why hasn’t anything ever bent the healthcare cost curve in the opposite direction?

People a lot smarter than me have asked and answered that question with some very sophisticated and well-supported evidence.

I’m neither smart, sophisticated nor well-supported. But I did read a few things this week that gave me what I think is the right answer. We throw money at the problem. It’s what we’ve always done. It’s what we’ll likely continue to do until the money runs out. And it never seems to run out. No matter what the problem is in healthcare, and there are plenty of problems, our answer always is to spend more money.

One thing I read was this Viewpoint published in the Journal of the American Medical Association. The authors weighed the benefits of a new billing code for inpatient infectious disease consultations. They said the extra money from doing the consults could reverse the growing shortage of infectious disease specialists at a time when we need them more than ever. The authors asked if creating more “add-on” billing codes for other medical specialties could reverse growing shortages of other specialties as well.

Another thing I read was this report published by UC Davis Health that recommended ways to “revitalize declining primary care in the in the U.S.” Topping the list of seven recommendations was this way to fix the problem: “Increase the proportion of spending on primary care, coupled with initiatives to slow the growth in total healthcare spending.” In other words, pay primary care physicians more even if it has to come out of someone else’s pockets.

I could list dozens of other examples with different challenges but the same solution: Spend more.

Healthcare’s default answer to every challenge is to throw more money at it. Until that mindset is gone, the actuaries at CMS will never be wrong.

Thanks for reading.