Last Wednesday, actuaries at the Centers for Medicare & Medicaid Services (CMS) released their annual National Health Expenditure (NHE) projections for the period 2018 to 2027. They forecast average annual growth of 5.5% in total health spending and reaching $6 trillion, or 19.4% of US gross domestic product (GDP) by 2027.
The trend reflects an uptick from the 3.9% growth rate for 2008-2013 and 5.3% for 2014-2016.
Higher prices across the board and increased Medicare spending were cited as the major contributors as more than 10,000 age into Medicare daily. Medicare spending growth is forecasted to increase 7.4% annually contrasted to Medicaid (+ 5.5%) and private insurance (+4.8%). The net result is that by 2027, federal, state and local governments will fund 47% of national health spending vs. 45% today.
This report surprised no one. Annual healthcare spending increases that exceed wage growth, consumer price increases and the gross domestic product are a recurring theme.
In response, industry trade associations will step up their advocacy efforts, activate well-ad campaigns to defend their sectors and place blame on other sectors and conditions beyond their control.
Congress will stage hearings to garner media attention and support their own election posturing. It’s a playbook we’ve seen before. Example: this week, the Senate Finance Committee will hear testimony about drug prices from executives of Merck, AbbVie, AstraZeneca, Bristol-Myers Squibb, Pfizer and Sanofi, and Johnson & Johnson. It’s a familiar scene dating back to hearings led by TN Senator Estes Kefauver (1960) who observed “I still don’t understand why druggists in London buy this drug for $7.53 and our drugstores have to pay $17.90”
It’s a familiar playbook. I’ve written about it before in the below reports and others:
So, what else is new?
What’s new is the public’s mood. For most, the jury’s out on whether the health system is motivated by compassion or purpose or profit and greed.
The U.S. represents 5% of the world’s population of 45% of global health spending. It’s a big, complicated and profitable industry. That’s good news for its investors and entrepreneurs and bad news for those who absorb its costs and households who lack access to its services.
Polls by Gallup show a gradual erosion of confidence and trust in the U.S. health system and pundits expect it to be on trial in Campaign 2020. Critics will take aim at its lack of price transparency, variable access and quality and oligopolistic consolidation (3 PBMs control 70% of the sector, 5 insurers control 55% of their space, and 3 drug distributors control 90%) as prima facie evidence for fundamental change. Medicare for All is a rallying cry for the disaffected though support shrinks as details about costs and trade-offs are known.
The public’s growing disaffection for the industry cuts across every sector. It’s palpable and intense.
What’s it mean?
It means every board of every organization in healthcare must equip trustees/directors to understand every sector in healthcare beyond their own. Understanding the entire healthcare ecosystem—emerging technologies, trends, challenges—is vital.
It means the industry’s trade associations must go beyond advocacy, member services and ad hoc alliances with other trade groups to define the bigger picture. Bridging health and social services, financing and delivery, physical and behavioral health and preventive and episodic care require integrated solutions.
It means Congress and every state should invest in educating legislators about the healthcare system absent partisan filters and lobbyist influences. Systemic reforms to improve population health, enhance safety access and quality and lower spending require adult conversations with constituents. The solutions are neither Red nor Blue.
According to CMS, health costs will continue to go up and public trust will go down. It means healthcare is on trial in the court of public opinion. The jury’s out.
PS: Hospitals relish being recognized. Two weeks ago, HealthGrades released its Top 50. In its 2018-2019 “America’s Best Hospitals”, US News and World Report released its Honor Roll of the Top 20. Oddly, only 3 appear on both lists. That’s why more than 800 hospitals lay claim to being among the best hospitals in the United States. Methodologies vary. The differences matter!
National Health Expenditure Data: 2018-2027; Centers for Medicare and Medicaid Services, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html