Spending on Physician, Clinical Services Expected to Rise 6.2% in 2022, CMS Says

WASHINGTON — Spending on physician and clinical services is expected to increase by 6.2% this year, with the increase gradually slowing to 5.5% in the years 2025 to 2030, according to a report released Monday by CMS.

Over the longer term “for physician and clinical services, spending growth is expected to be 5.6% per year on average for 2021 through 2030,” said Andrea Sisko, PhD, a senior economist in the National Health Statistics Group, CMS Office of the Actuary, during a Monday morning briefing with reporters.

“Slower projected overall growth in physician and clinical services spending reflects declines in federal supplemental payments to providers” as the COVID-19 public health emergency comes to a close, she continued. “However, the slowdown is projected to be offset somewhat by faster spending growth for Medicare, which is based on increases in projected use, as well as temporary increases in physician payments in 2022.”

In addition, “faster growth in spending is projected as those with private health insurance are expected to resume more typical patterns of use, and effects of the pandemic on overall physician and clinical services spending are expected to diminish … for the remainder of the projection period,” Sisko added. “Projected spending growth primarily reflects decelerating growth in private health insurance spending in response to projected slower income growth earlier in the period.”

Overall, healthcare spending is expected to grow 5.1% per year on average from 2021 to 2030, the same as the expected growth rate in the gross domestic product (GDP), said John Poisal, deputy director of the National Health Statistics Group. But in the near term, he noted, growth has slowed due to the pandemic, with the national health expenditure growth rate down to 4.2% in 2021 compared with 9.7% in 2020.

However, healthcare utilization presumably began rebounding in 2021 and should normalize through 2024, Poisal added. And overall health spending is projected to have hit $4.3 trillion in 2021, which will rise to an estimated $6.8 trillion in 2030, according to a press release from Health Affairs, which published the CMS report.

As the pandemic wanes, the government’s share of healthcare spending is also expected to drop, Poisal said. “By 2024, the government’s share of health spending — which includes federal contributions as well as state and local — is projected to fall from its all-time high of 51% in 2020 down to a level of 46%,” he noted.

On the health insurance side, the percentage of the population with health insurance is expected to peak this year at 91.1% — due in part to more people enrolling in Medicaid during the pandemic thanks to loosened requirements in that program — and then fall back to pre-pandemic levels once the pubic health emergency ends, dropping to 90.5% by 2030, Poisal said. Not surprisingly, growth in Medicaid spending is projected to drop from 10.4% in 2021 down to 3.3% in 2023 to 2024, before increasing slightly to 5.6% in 2025 to 2030.

The report also looked at spending for healthcare services such as hospital care and prescription drugs. For hospital care, as with clinician care, the growth rate is expected to drop in the coming years due to declining payments from the federal government, falling from a 6.9% growth rate in 2022 down to an average of 5.5% in the years 2025 to 2030, Sisko said.

Growth in prescription drug spending also dropped temporarily during the pandemic, decreasing from a growth rate of 4.7% in 2021 to 4.3% in 2022. However, it will pick up after that, as prices and utilization are both expected to increase due to new drugs introduced in those years, with the growth rate jumping to an estimated 4.9% in 2023 to 2024, according to CMS.

The report was developed using actuarial and econometric modeling techniques and included input from the 2021 Medicare Trustees Report, as well as national health expenditure data released in December 2021, CMS said.