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The Keckley Report

Medicare Trustees’ NHE Report: Interesting Read but Understandably Flawed

By April 4, 2022March 1st, 2023No Comments

Last Monday, Medicare Trustees released the 56th edition of their National Health Expenditures (NHE) Forecast for 2021-2030 which is widely used by policymakers and operators to gauge what’s ahead for U.S. healthcare. Regrettably, it’s flawed.

Per the analysis prepared by the CMS Office of the Actuary:

·        National health spending increased 9.7% in 2020 from $3.8 trillion in 2019 to $4.1 trillion. It is projected to increase 4.2% in 2021 to $4.3 trillion, 4.6% in 2022 to $4.5 trillion, and 5.1%/yr. between 2021 and 2030 reaching $6.8 trillion (19.6% of GDP).

·        Projections for 2021-2030: Medicare spending will increase 7.2%/yr., Medicaid will increase 5.6%/yr., private insurance will increase 5.6%/yr., and consumer out of pocket will increase 4.6%/yr. (though +6.1% in 2022—an election year)

·        Total healthcare spending is projected to increase 50.2% from 2022 to 2030 but household out-of-pocket spending will increase 41.4%.

Throughout the 277-page report, the actuaries acknowledge uncertainty about future spending offering a few disclaimers—

·        2020 spending growth (9.7%) was an anomaly due to the pandemic. Utilization of services will return to normalcy from 2022 to 2024 and normal economic, demographic and medical inflation factors will be operative from 2025-2030. As a result, the federal government’s share of total spending with shrink from 51% in 2020 to 46% in 2030.

·        Spending for pandemic related testing, vaccines and services will wind-down by 2023.

·        Health insurance coverage is expected to be 91.1% in 2021 and 2022 edging down to 89.8% in 2030.

·        Sequestration cuts to Medicare will occur on schedule this year (2%) and hospitals will see their DSH drug discounts shrink (16 drugmakers have already imposed restrictions).

And the actuaries also offered several long-range projections to 2095 that are eye-catching:

·        Medicare spending will increase steadily from their current level of 4.0% of GDP in 2020 to 6.2% in 2045 to 8.5% of GDP in 2095.

·        The hospital insurance fund (Part A funded by payroll taxes) is projected to cover 91% of incurred program costs in 2026—a shortfall for the 5th consecutive year. By 2095, the HI actuarial deficit is projected to be 0.77%.

My take:

The CMS’ forecast is interesting but its usefulness is limited. By design, the actuaries used 2019 as their baseline, reasoning 2020 was an anomaly due to the pandemic and federal relief funds that inflated 2020 spending. Though utilization has recovered to pre-pandemic levels, spending levels have not fully recovered, and there remain major unknowns not considered in the report:

·        Macroeconomic unknowns: the potential for a recession, supply chain disruption, workforce shortages, wage-inflation, the lingering impact of inflation, GDP growth, the continued digitalization of products and services industries and others.

·        Health industry unknowns: the effectiveness of CMS’ alternative payment models and their continuation after 2025, competition from private-equity funded disruptors and the troubling prospects for many SPAC-funded deals, the potential for another pandemic wave, the impact of price transparency and surprise medical bill laws on spending, access to and pricing for high cost clinical innovations (i.e. Aduhelm, a high-priced drug for Alzheimer’s is still awaiting coverage determination by Medicare), how much the Federal Government will recover from providers in the Medicare Advance Payment loan program, how the FTC and DOJ adjudicate consolidation across the industry and many others.    

Also not factored in the forecast are additional budget items in President Biden’s 2022 Budget Proposal announced March 28 including $82 billion for pandemic preparedness and biodefense, $28 billion for the CDC to address pandemic preparedness, $12 billion for development of tests and vaccines, $11 billion for the Substance Abuse and Mental Health Services Administration and others. Since 2022 and 2024 are election years and inflation is the top concern to voters, no one can be sure about federal spending but confident campaigners for federal office will claim government spending wasteful but Medicare deserving of protection. It’s safe rhetoric!

At best, the CMS forecast is a piece of a complex puzzle. At worst, it contributes to misinformation about health spending in the U.S. health system based on pre-pandemic assumptions that are no longer valid. The real-world of U.S. healthcare is more responsive to opportunities, threats and economic cycles than the Medicare Trustees recognize.  That’s likely to continue. Average annual NHE growth has been below historical averages since 2008 but it has outpaced average annual growth of the economy (GDP) in each year.

The Medicare Trustees end the report with an obvious under-statement: “Medicare’s actual future costs are highly uncertain for reasons apart from the inherent challenges in projecting health care cost growth over time…The financial projections in this report indicate a need for substantial changes to address Medicare’s financial challenges…The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address these challenges.”

Fat chance. Congress has subordinated objective analysis of the health system’s performance and funding to partisan gamesmanship. That leaves it to the private sector and states to find workarounds and solutions. And it assures that employers will activate strategies to address the health and wellbeing of their workforce sans hidden taxes they pay to providers who mark-up services to offset their Medicare shortfall.

The Medicare Trustees report is interesting reading but understandably flawed.


PS This month, we will hit a grim milestone: one million deaths due to the Covid-19 pandemic including 175,000 this year. It has impacted some groups harder than others: 1 in 75 seniors, residents of long-term-care facilities, Blacks and Hispanics at twice the rate for whites, and people in the reddest counties who have died at three times the rate of those in the bluest. And with the more contagious B.A.2 variant bearing down and public fatigue about the virus growing, the likelihood of a new wave in 2022 looms large for the economy, healthcare and every American.


“CMS Office of the Actuary Releases 2021-2030 Projections of National Health Expenditures” CMS March 28, 2022

Poisal et al National Health Expenditure Projections, 2021–30: Growth To Moderate As COVID-19 Impacts Wane Health Affairs March 28, 2022No Access



CDC:  Covid cases, deaths down: The U.S. is now averaging roughly 29,253 new COVID cases per day, a 6% drop from the rolling average of about 31,000 cases two weeks ago (and about even with new cases just a week ago). Notably, there were 700 daily deaths on average from COVID in the study period, down from more than 1,200 two weeks ago.


FDA authorizes second booster shots: Last Tuesday, the FDA authorized a second booster dose of either the Pfizer-BioNTech or the Moderna COVID-19 vaccines for older people 50+ and certain immunocompromised individuals.

FDA March 29, 2022

Study: convalescent plasma effective in reducing Covid hospitalization: Polyclonal convalescent plasma is obtained from donors who have recovered from coronavirus disease 2019 (Covid-19) but its efficacy in preventing serious complications in outpatients with recent-onset Covid-19 is uncertain.

In this multicenter double-blind, randomized, controlled trial led by Johns Hopkins researchers, the efficacy and safety of Covid-19 convalescent plasma was compared with control plasma. Key finding: “In participants with Covid-19, most of whom were unvaccinated, the administration of convalescent plasma within 9 days after the onset of symptoms reduced the risk of disease progression leading to hospitalization.”

Sullivan et al “Early Outpatient Treatment for Covid-19 with Convalescent Plasma” New England Journal of Medicine March 30, 2022 DOI: 10.1056/NEJMoa2119657

Healthcare Investing

SEC aims to rein in SPACS: The SEC voted 3-1 last week to make major changes to the regulation of SPACs (blank check companies) that would make them more like IPOs, diminishing the perceived advantage of blank-check deals. As drafted, the rules aim to curb the practice of unrealistic revenue projections, increase disclosures related to sponsors’ incentives and allow investors to more easily sue entities involved in blank-check deals. The proposed rules apply to blank check companies that have already been formed.

Per Pitchbook, there are currently 654 US SPACs that have gone public but have yet to complete a merger including 339 with less than a year to execute a deal representing $157 billion in funds raised from investors. During the most recent quarter, SPAC mergers were announced at a rate of about five per month, according to Pitchbook data.

“Proposed SEC rules would upend SPACs’ special status” Pitchbook March 30, 2022

Rock Health: digital behavioral health investing up: Venture capital funding for digital behavioral health tools for children and teenagers reached $919 million in 2021, up from $54 million in 2017.As of August 2021, about 1 in 3 behavioral health outpatient visits for people 18 and younger were done via telehealth.

Rock Health

Long Term Care

CMS proposes hospice wage rule: In a proposed rule issued last week, the Centers for Medicare and Medicaid Services proposed to permanently cap annual hospice wage index adjustments so payments never decrease more than 5% from a prior year. It also proposes a 2.7% increase in hospice payments for fiscal 2023, which would amount $580 million in additional reimbursements. The hospice payment update also includes a statutory aggregate annual cap per patient: for FY 2023 is $32,142.65.

Fiscal Year 2023 Hospice Payment Rate Update Proposed Rule (CMS-1773-P)” CMS March 30, 2022

Mental Health

Meta-analysis: Music therapy efficacy: This systematic review and meta-analysis of 26 studies comprising 779 individuals found that music interventions were associated with statistically and clinically significant changes in mental HRQOL, both preintervention to postintervention as well as when music interventions were added to treatment as usual vs treatment as usual control groups.

Association of Music Interventions With Health-Related Quality of Life A Systematic Review and Meta-analysis JAMA Netw Open. March 22, 2022;5(3):e223236. doi:10.1001/jamanetworkopen.2022.3236

Senate Finance Committee urges mental health focus as prevalence spikes during pandemic: The Senate Finance Committee released a bipartisan report last week outlining problems and potential solutions on mental health care access noting that in 2021 40% of adults reported symptoms of anxiety or depression from April through February 2021—up from 11% prior to the pandemic. The report noted that Americans seeking mental health care wait an average of 11 years for treatment and 80% of psychiatrists report burnout.

Mental health care in the United States the case for federal action US Senate Finance Committee March 2022

Hospital Finances

Kaufman Hall March Hospital Flash Report: In February, 2022, “Actual hospital margins remained negative for a second month as inpatient volumes decreased and outpatient volumes staggered to recover in the aftermath of the Omicron surge.” Key data:

·        The median Kaufman Hall Operating Margin Index reflecting actual margins for the month was -3.45%, up from -4.52% in January but still well below sustainable levels. (Median change in Operating Margin was down 11.8% from January to February, and the median change in Operating EBITDA Margin decreased 7.5% month-over-month.2 Year-over-year (YOY), the median change in Operating Margin was down 26.7%, and the median change in Operating EBITDA Margin declined 24.3%.)

·        Patient Days were down 13.3% month-over-month and 4.7% compared to February 2020. Adjusted Patient Days decreased 7.6% from January to February and 4.7% versus February 2020.

·        Average LOS rose 3.6% YOY and 12.6% versus the same month in 2020.

·        Adjusted Discharges decreased 10.8% versus February 2020 and 0.6% month-over-month, but were up 0.6% versus February 2021.

·        Surgery volumes saw moderate increases.

Kaufman Hall March 2022 Hospital Flash Report

Fair Health: Hospital charges grew faster than other types of care during Covid: Hospitals increased their median charges for evaluation and management services by 7% and related negotiated rates rose 5%, according to FAIR Health’s analysis. “Price inflation for hospital E/M services outpaced all other categories the not-for-profit research firm studied for the fifth-consecutive year. Related median charges jumped 6% and negotiated rates ballooned 10% from November 2019 to November 2020. “

Fair Health

Public Opinion

Morning Consult Poll: Democrats fare better on healthcare, Republicans on inflation and the economy: Per MC’s latest poll of which party voters trust to address issues:

·        Inflation: 46% trust republicans vs. 32% Democrats

·        Handling of the economy: 47% trust Republicans vs. 36% Democrats

·        Coronavirus:  42% trust Democrats vs. 34% Republicans

·        Medicare & Social Security:  44% trust Democrats vs. 36% Republicans

·        Healthcare: 45% trust Democrats vs. 38% Republicans

Morning Consult

NBC News Poll: 71% of Americans said they believe the nation is headed on the wrong track, compared to 22% who said they believe it’s headed in the right direction– unchanged from January’s poll. 

·        62% of respondents said their family incomes are falling behind the cost of living, 31% said they’re staying even, and 6% said their incomes are going up faster than the cost of living.

·        Asked whom or what they blame the most for increasing inflation, a plurality of Americans — 38% blame the Biden administration, 28% blame the Covid pandemic, 23% attributed to corporations that have increased prices, and 6% blame on Russia’s invasion of Ukraine. 

·        Asked which one issue should be Biden’s top priority — reducing inflation and improving the economy or working to end the war in Ukraine — 68% picked inflation/economy, compared to 29% who picked the war in Ukraine. 

NBC News

KFF Tracking Poll:

  • 61% of Americans say limiting how much drug companies can increase the price of prescription drugs each year to not surpass the rate of inflation should be a “top priority” for Congress. Slight majorities also say capping out-of-pocket costs for insulin at $35 a month (53%) and placing a limit on out-of-pocket costs for seniors (52%) are top priorities for Congress to take action on in the coming months.

  • 12 years since the passage of the Affordable Care Act, a majority of the public (55%) continue to view the law favorably, but opinions towards the 2010 health reform law are still divided by partisanship. Majorities of Democrats (87%) hold favorable views of the law and many (43%) say the law has directly helped them and their families. On the other side of the political aisle, most Republicans (79%) view the law unfavorably and four in ten say the ACA has hurt them and their families.

Kaiser Family Foundation Tracking Poll March 2022     

Care Management

Opinion: Choosing Wisely ineffective: The Choosing Wisely Campaign was launched in 2012 by the American Board of Internal Medicine (ABIM) Foundation with lists from 9 societies and has since grown to include more than 80 societies, more than 600 items in 25 other countries, including Canada, the United Kingdom, Germany, and Japan.

“Choosing Wisely was an immediate public relations win for the medical profession in 2012, demonstrating that doctors were stepping up to address low value and high costs in medicine. Ten years later, however, it’s clear that making lists and publicizing them are not sufficient to reduce low-value care. Medical services that do not improve patients’ health continue to account for an estimated 10 to 20% of health care provided in the United States, costing $75 billion to $101 billion per year.

“Ten Years of Choosing Wisely to Reduce Low-Value Care” NEJM April 2, 2022