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June 28, 2024

CMS National Health Expenditures Project Increasing Revenue, and Increasing Costs, for Hospitals and Healthcare Facilities

The Centers for Medicare & Medicaid Services (CMS) projects that National Health Expenditures (NHE) will grow at an average annual rate of 5.6% from 2023 to 2032, outpacing the projected average gross domestic product growth rate of 4.3%. This increase would raise healthcare spending's share of GDP from 17.3% in 2022 to 19.7% in 2032.

 Key projected impacts on hospitals and healthcare facilities include:

  • Increased Spending Growth On Hospital Services: Hospitals can expect an average annual spending growth rate of 5.7% from 2023 to 2032, driven by increased hospital usage among insureds covered by  nearly all types of payers (though with different payers driving spending growth in various years).
  • Medicare and Medicaid: Medicare spending growth is projected to average 7.4% annually, influenced by baby boomer enrollments. Medicaid growth is projected to average a lower 5.2% in part due to resumed state eligibility redeterminations and subsequent enrollment stabilization.
  •  Private Insurance: Private health insurance spending is projected to grow an average of 5.6% annually, with fluctuations in enrollment due to changes in enhanced Marketplace subsidies.
  • Out-of-Pocket Costs: These are expected to grow at an average rate of 4.7%, partly due to new caps on Medicare Part D expenses.
  • Physician and Clinical Services: Spending in this area is projected to  match the overall NHE growth at 5.6%.
  • Retail Prescription Drugs: CMS expects a higher average growth rate of 6.0%, influenced by drug pricing reforms and the introduction of new medications.

These projections suggest healthcare facilities can expect continued revenue growth through 2032. However, Overall, healthcare facilities likely will need to manage their own increased health benefit costs and adjust to evolving funding landscapes, influenced by legislative changes and shifting health insurance enrollment patterns.

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