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The Keckley Report

The Healthcare Economy: Three Key Takeaways that Frame Public and Private Sector Response

By June 17, 2024No Comments

Last week, 2 important economic reports were released that provide a retrospective and prospective assessment of the U.S. health economy:

The CBO National Health Expenditure Forecast to 2032: “Health care spending growth is expected to outpace that of the gross domestic product (GDP) during the coming decade, resulting in a health share of GDP that reaches 19.7% by 2032 (up from 17.3% in 2022). National health expenditures are projected to have grown 7.5% in 2023, when the COVID-19 public health emergency ended. This reflects broad increases in the use of health care, which is associated with an estimated 93.1% of the population being insured that year… During 2027–32, personal health care price inflation and growth in the use of health care services and goods contribute to projected health spending that grows at a faster rate than the rest of the economy.”

The Congressional Budget Office forecast that from 2024 to 2032:

  • National Health Expenditures will increase 52.6%: $5.048 trillion (17.6% of GDP) to $7,705 trillion (19.7% of GDP) based on average annual growth of: +5.2% in 2024 increasing to +5.6% in 2032
  • NHE/Capita will increase 45.6%: from $15,054 in 2024 to $21,927 in 2032
  • Physician services spending will increase 51.2%: from $1006.5 trillion (19.9% of NHE) to $1522.1 trillion (19.7% of total NHE)
  • Hospital spending will increase 51.6%: from $1559.6 trillion (30.9% of total NHE) in 2024 to $2366.3 trillion (30.7% of total NHE) in 2032.
  • Prescription drug spending will increase 57.1%: from 463.6 billion (9.2% of total NHE) to 728.5 billion (9.4% of total NHE)
  • The net cost of insurance will increase 62.9%: from 328.2 billion (6.5% of total NHE) to 534.7 billion (6.9% of total NHE).
  • The U.S. Population will increase 4.9%: from 334.9 million in 2024 to 351.4 million in 2032.

The Bureau of Labor Statistics CPI Report for May 2024 and Last 12 Months (May 2023-May2024): “The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3% in April… Over the last 12 months, the all-items index increased 3.3% before seasonal adjustment. More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4% for the fourth consecutive month. The index for food increased 0.1% in May. … The index for all items less food and energy rose 0.2% in May, after rising 0.3 % the preceding month… The all-items index rose 3.3% for the 12 months ending May, a smaller increase than the 3.4% increase for the 12 months ending April. The all items less food and energy index rose 3.4 % over the last 12 months. The energy index increased 3.7%for the 12 months ending May. The food index increased 2.1%over the last year.

Medical care services, which represents 6.5% of the overall CPI, increased 3.1%–lower than the overall CPI. Key elements included in this category reflect wide variance: hospital and OTC prices exceeded the overall CPI while insurance, prescription drugs and physician services were lower.

  • Physicians’ services CPI (1.8% of total impact): LTM: +1.4%
  • Hospital services CPI (1.0% of total impact): LTM: +7.3%
  • Prescription drugs (.9% of total impact) LTM +2.4%
  • Over the Counter Products (.4% of total impact) LTM 5.9%
  • Health insurance (.6% of total) LTM -7.7%

Other categories of greater impact on the overall CPI than medical services are Shelter (36.1%), Commodities (18.6%), Food (13.4%), Energy (7.0%) and Transportation (6.5%).

Three key takeaways from these reports:

  • The health economy is big and getting bigger. But it’s less obvious to consumers in the prices they experience than to employers, state and federal government who fund the majority of its spending. Notably, OTC products are an exception: they’re a direct OOP expense for most consumers. To consumers, especially renters and young adults hoping to purchase homes, the escalating costs of housing have considerably more impact than health prices today but directly impact on their ability to afford coverage and services. Per Redfin, mortgage rates will hover at 6-7% through next year and rents will increase 10% or more.
  • Proportionate to National Health Expenditure growth, spending for hospitals and physician services will remain at current levels while spending for prescription drugs and health insurance will increase. That’s certain to increase attention to price controls and heighten tension between insurers and providers.
  • There’s scant evidence the value agenda aka value-based purchases, alternative payment models et al has lowered spending nor considered significant in forecasts.

The health economy is expanding above the overall rates of population growth, overall inflation and the U.S. economy. GDP.  Its long-term sustainability is in question unless monetary policies enable other industries to grow proportionately and/or taxpayers agree to pay more for its services. These data confirm its unit costs and prices are problematic.

As Campaign 2024 heats up with the economy as its key issue, promises to contain health spending, impose price controls, limit consolidation and increase competition will be prominent. Public sector actions will likely feature state initiatives to lower cost and spend taxpayer money more effectively. Private sector actions will center on employer and insurer initiatives to increase out of pocket payments for enrollees and reduce their choices of providers.

Thus, these reports paint a cautionary picture for the health economy going forward. Each sector will feel cost-containment pressure and each will claim it is responding appropriately. Some actually will.


PS: The issue of tax exemptions for not-for-profit hospitals reared itself again last week. The Committee for a Responsible Federal Budget—a conservative leaning think tank—issued a report arguing the exemption needs to be ended or cut.  In response, the American Hospital Association issued a testy reply claiming the report’s math misleading and motivation ill-conceived.

This issue is not going away: it requires objective analysis, fresh thinking and new voices.  For a recap, see the Hospital Section below.


National Health Expenditure Projections, 2023–32: Payer Trends Diverge as Pandemic-Related Policies Fade | Health Affairs

CPI Home : U.S. Bureau of Labor Statistics (

Sections in today’s Report

  • Quotables
  • Economy
  • Hospitals
  • Insurers
  • Regulators


Re: Home ownership and housing prices: “The average sale price for a home in 2024 is a record high $513,100, the average 30-year fixed rate mortgage is near 7% and the ratio of the median single-family home sale price to household income — a good proxy for tracking nationwide home affordability — is 7.68 to 1, an all-time record.

Naturally, housing concerns loom large in the race for the White House: An April Michigan Ross/Financial Times poll showed that 27% of Americans assess housing costs as one of their top three economic issues as they make their vote for president, ranking higher than government spending, the national debt, wages or even interest rates.

Younger voters are especially energized around housing issues, the poll showed, with 31% of all voters 18-44 marking it as a top economic issue, tied with gas prices and wages…”

‘The most challenging home buying market we’ve ever seen’ – POLITICO

Re: Hospital, prescription drug price controls: “Skeptics are correct to be cautious about price regulation because in competitive markets it is usually a bad idea, and even in noncompetitive markets, it can cause problems. But proceeding with caution does not mean giving up on price regulation entirely. Currently, in brand-name pharmaceutical markets and noncompetitive hospital markets, the short-term losses from high prices are substantial and they clearly outweigh the likely gains from future investments and innovation. Recent increases in insurance coverage through the Affordable Care Act and the Inflation Reduction Act, and gains in the breadth of coverage available to seniors through Medicare Part D, are imperiled by high and increasing prices. It is time to look at the evidence, not the textbook, and regulate prices in health care markets where competition cannot do the job.”

It Is Time to Consider More Price Regulation in Health Care | JAMA Health Forum | JAMA Network

Re: hospital M&A oversight: “35 states currently have laws that require not-for-profit healthcare entities that meet certain requirements, usually based on revenue size, to report M&A activity to state regulators. 14 of these states extend these requirements to for-profit healthcare entities as well. These state laws vary in scope but generally target healthcare deals that fall below the federal reporting threshold for transaction size, updated to $119.5M in 2024. Two states with particularly strong healthcare M&A oversight laws are Oregon and Minnesota…Although some believe that these state laws will help preserve healthcare competition and access, they will increase the complexity, cost, and timeline for healthcare entities seeking to merge and could make survival for smaller providers even more difficult.”

Many States Scrutinizing Healthcare Consolidation | Kaufman Hall\

Re: IVF Therapy: “The Southern Baptists, the country’s largest Protestant denomination, voted Wednesday to oppose the use of in vitro fertilization as it is commonly practiced, aligning the church with a right-wing stance on an issue that roiled the nation earlier this year.

Delegates to the Southern Baptist Convention’s annual meeting approved a resolution that called to “reaffirm the unconditional value and right to life of every human being, including those in an embryonic stage, and to only utilize reproductive technologies consistent with that affirmation.”

The resolution noted that the IVF process often involves creating more embryos than are actually used, and can result in the destruction of unused embryos. In a vote by raised hands, delegates—known as messengers—overwhelmingly approved the resolution…  Earlier Wednesday, the delegates failed to pass a measure banning churches with women pastors, a surprise reversal of its earlier decision.

The IVF vote comes months after Alabama’s Supreme Court ruled that frozen embryos qualified as children under a state law. The ruling temporarily upended the procedure in the state and sent Republicans nationwide scrambling to clarify the GOP’s position on the treatment.”

Southern Baptists Vote Against the Use of IVF – WSJ

Re: NIH investigation: “Congress has a responsibility to the American people to ensure that the NIH is held accountable and that its mission serves all of our interests. It has been nearly two decades since Congress critically evaluated the NIH and advanced structural legislative reforms. Given concerns raised during and after the Covid-19 pandemic and the need to maximize the impact of taxpayer money, it is imperative to build a stronger and more accountable NIH.”

Rep. Cathy McMorris Rodgers (R-Wash.) serves as chair of the House Committee on Energy and Commerce. Rep. Robert B. Aderholt (R-Ala.) serves as chairman of the House Appropriations Labor, Health & Human Services, and Education Subcommittee.

NIH needs restructuring, key Republican committee chairs say | STAT (

Re: Change Healthcare Cybersecurity breach: “Last Monday, federal regulators said UnitedHealth Group will be allowed to notify people whose data was exposed during a ransomware attack on its Change Healthcare unit in February. That means UnitedHealth can notify victims of the many U.S. hospitals and healthcare providers whose patients were affected by the hack, sparing providers from time-consuming and expensive work.

The company said in response to questions from the Senate Finance Committee Monday that it is still conducting an investigation into what data was breached by hackers, and warned it could contain sensitive information such as names, addresses, medical codes and insurance numbers. UHG hasn’t provided a firm timeline for when it expects to complete its investigation.”

Federal Authorities Say UnitedHealth Can Notify Victims of Massive Data Breach – WSJ

Re: Deal environment: “Deal volumes have increased from 2023, but the early 2024 optimism exhibited at the JP Morgan and similar healthcare deal conferences has not materialized. Valuations and transaction structures remain stubbornly aggressive (seller-friendly) for A-grade companies that have performed well in today’s more challenging operating environment. Concurrently, there continues to be a bid-ask spread for B-grade and below companies as owners are anchored by 2020 and 2021 valuation levels, and those of the limited A-grade deals that are transacting. Buyers are being more discriminating regarding financial and operating performance, and related to the quality of their due diligence findings, with many transaction processes remaining protracted and a high percentage of broken deals still occurring. Broad auctions still occur, but some advisors and owners are entertaining narrower and more curated buyer discussions for those with an active investment thesis.

Council Capital IV Q1 2024 Investor Letter and Portfolio Company Summary – – Mail (


Annual Percent Change in Health Care Spending per Person, Utilization, and Price

Year Annual Spending per Person Utilization Price
2018-2019 3.8% 1.1% 2.7%
2019-2020 -3.4% -7.5% 4.4%
2020-2021 14.9% 12.8% 1.9%
2021-2022 3.0% -1.2% 4.2%

Health Care Cost Institute, 2022 Health Care Cost and Utilization Report, April 2024

The authors defined low-income people as those who make less than 200% of the federal poverty level (or $51,500 for a family of four in 2019), and they defined health care costs as the contributions people make out of their paychecks for job-based coverage as well as out-of-pocket costs. The finding: Roughly 26% of their income (after accounting for food) went toward health care in 2019, compared with just 6% for higher-income families.

Financial Burden of Health Care in the Privately Insured US Population | Health Care Economics, Insurance, Payment | JAMA Internal Medicine | JAMA Network

Share of adults with medical debt by household income:

  • Less than $40k: 68%
  • $40-89.9K:57%
  • More than $90K: 45%

Diagnosis: Debt – KFF Health News



Committee for a Responsible Federal Budget: Cut/suspend NFP hospital tax exemption: “More than half of the nation’s hospitals are designated as “charitable” nonprofit institutions by the Internal Revenue Service (IRS), exempting them from most federal, state, and local taxes and making donations to them eligible for a tax deduction.

Linked to this status is the requirement that nonprofit hospitals will deliver benefits to the communities they serve. Such benefits can encompass a broad range of activities like charity care and financial assistance programs, local health improvement programs, and health professional education. However, there is insufficient enforcement of existing requirements and no unambiguous federal statutory or regulatory definition of “community benefits.

Research consistently shows that nonprofit hospitals are failing to meet community benefit obligations under all but the broadest (many argue, overly expansive) definitions.1 Investigative reports highlight instances where such hospitals prioritize financial gains over community welfare, often neglecting those in need of financial assistance. Furthermore, evidence suggests nonprofit hospitals offer fewer community benefits compared to for-profit hospitals.

Over the next decade (2025-2034), we estimate that the federal revenue loss from the nonprofit hospital tax exemption will total around $260 billion.… nonprofits provide charity care at 2.3% of operating expenses, relative to an estimated value of the tax exemption of 4.3% of operating expenses. KFF found similar results in 2020 but noted the wide ranges in charity care provision. The top 9% of hospitals in delivering charity care spent 7% of operating expenses or higher. However, the 8% least charitable hospitals only gave charity care equal to 0.1% of operating expenses.

Both studies also found that nonprofit hospitals generally provide less charity care than their for-profit counterparts, likely because for-profit hospitals can deduct charity care costs from taxes and have a vested interest in building their reputations in local communities, particularly in areas where they directly compete with nonprofit hospitals…

Given its large cost and questionable value, policymakers should work to reform or repeal the tax advantages for nonprofit hospitals and should also improve the regulatory regime to ensure transparency, accountability, and provision of community benefits.”

The Federal Tax Benefits for Nonprofit Hospitals-Wed, 06/12/2024 – 12:00 | Committee for a Responsible Federal Budget (

AHA Response: “In reality, eliminating that exemption could result in more burden being placed on taxpayers to cover the cost of all the benefits and services these hospitals provide to their patients and communities. Worse than that, eliminating the longstanding exemption would cause hospitals across the country to close their doors, which would be the epitome of fiscal recklessness.

Nonprofit hospitals and health systems give back to their communities in a variety of important ways. In addition to providing charity care to those in financial need, hospitals help patients find health screenings, housing, and healthy food. They provide transportation to medical appointments that sick community members would otherwise skip. And they provide educational and other programs like vaccination clinics to address the many other needs that affect their community’s health and well-being. In 2020, the most recent year of data, nonprofit hospitals and systems provided nearly $130 billion in benefits to communities — $20 billion more than the prior year.

Hospitals tailor these benefits to the local needs of their communities, which can vary drastically based on location, patient demographics, and payer mix. In fact, the benefit that tax-exempt hospitals provided to their communities, as reported on the IRS Form 990 Schedule H, was estimated by the consulting firm EY at almost nine times greater than the value of tax revenue forgone. That is a striking return on investment.

Drastically oversimplifying these complex hospital-community relationships by boiling them down to a single metric — charity care — serves no one except those committed to smearing hospitals at every opportunity. Yet that is exactly what the Committee for a Responsible Federal Budget has done in its report. This position would be surprising if not for the fact that this report was produced in conjunction with the well-known anti-hospital, billionaire-backed Arnold Ventures and in large part relies on prior studies also funded by Arnold Ventures that the AHA has debunked time and again.”

An Irresponsible Take on Nonprofit Hospitals’ Value to Patients and Communities | AHA News



Farrah: Top Medicare Advantage Organizations (April 2024)

Parent Company Number of Lives* Market Share*
UnitedHealth 9,405,899 28.1%
Humana 6,044,223 18.1%
CVS 4,137,525 12.4%
Elevance Health 1,987,540 5.9%
Kaiser Foundation Group 1,895,600 5.7%
Centene 1,117,321 3.3%
BCBS of Michigan 697,939 2.1%
Cigna Health 586,087 1.8%
Highmark 411,707 1.2%
Guidewell 329,168 1.0%

* April 2024

Mark Farrah Associates, Half of People Eligible for Medicare Selected Medicare Advantage Plans in 2024, April 2024


Regulators, Legislation

Private equity control legislation introduced: Last week, Massachusetts Sens. Elizabeth Warren and Ed Markey introduced the Corporate Crimes Against Health Care Act of 2024 in an attempt to remove “corporate greed and private equity abuse” in healthcare noting private equity fund assets have more than doubled, hitting $8.2 trillion in 2023. Bill highlights:

  • The act would result in criminal penalty of up to six years in prison for executives who loot healthcare organizations like hospitals and nursing homes should that looting result in the death of a patient.
  • The Justice Department and state attorneys general would have the ability to take back all compensation from private equity and portfolio company executives, including salaries, in a 10-year period before or after a healthcare firm they have acquired experiences avoidable financial issues due to their actions. An associated civil penalty could be authorized of up to five times the claw back amount under the act.
  • Federal health program payments to entities that sell assets or use them as REIT loan collateral could be banned, apart from existing arrangements, under the act. The Tax Code rule that allows taxable REIT subsidiaries to sway healthcare operations could also be repealed. The act would also cut 20% pass-through deduction, which was passed in the 2017 Trump tax cuts, for REIT investors.

Corporate Crimes Against Health Care Act – Search News (