CMS Releases Latest Outlook for Future Drug Spending

Recently, the Centers for Medicare and Medicaid Services (CMS) released their projections for the United States National Health Expenditures (NHE). Looking ahead to 2024, CMS expects total United States spending on healthcare to grow from $3.6 trillion in 2018 (the year for which we have most recent historical data) to $5 trillion in 2024.

Total Spending

Total U.S. spending on healthcare is projected to grow by $1.4 trillion, from $3.6 trillion in 2018 to $5.0 trillion in 2024.

The four largest categories for growth are hospital care, professional services (physicians, dentists, and other healthcare professionals), outpatient prescription drugs, and healthcare administration costs. These four categories account for more than three-quarters of total healthcare spending in the United States in both 2018 and 2024. Similarly, they account for 77% of the projected total $1.4 trillion increase in healthcare spending growth.

Hospital care is expected to grow $461.3 billion, professional services by $337.3 billion, outpatient prescription drugs by $110.1 billion, and government administration/healthcare administration costs by $109.7 billion.

Hospitals and Professional Services

According to the projection, spending on hospitals and professional services is expected to grow by a combined $800 billion, accounting for more than 60% of the projected $1.4 trillion increase in healthcare spending. This is consistent with historical trends.

Outpatient Prescription Drugs

According to the projection, net spending on outpatient prescription drugs is expected to shrink to less than 9% of total United States spending in 2024 – its lowest level since 2000. Further, CMS projects that from 2019 to 2024, total health spending will grow at an average rate of 5.3%, while prescription drug spending will grow more slowly, at an average rate of 4.8%.

CMS also projects that the growth rate for drug spending will catch up to growth in overall healthcare spending by 2021, due to faster price increases, higher growth in utilization, and slower growth in rebates. However, CMS has overestimated drug spending in the past – in 2018, actual net outpatient prescription drug spending was $335 billion, which is $59 billion less than its 2012 prediction and $50 billion less than its 2015 projection.

Conclusion

Making predictions is easy, but making accurate predictions is hard. Shortly after these predictions were released, the United States began to see the impact of COVID-19. What impact the pandemic will have on these numbers – if any – is unknown at this time, but it will be something to keep an eye on in the future.

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