The office, which is independent from CMS leadership, predicts personal healthcare spending — which includes provider and retail revenue from medical goods and services — will increase 2.3% in 2025.
Kevin Holoran, a senior director with data and analytics firm Fitch Group, said the projected 1.7% increase in spending on hospital care "feels a little low." In December, Fitch Ratings released a 2025 outlook for nonprofit hospitals and health systems suggesting the sector would benefit from boosted cash flows and improved equity market returns.
Related: Health spending rose to $4.9T, CMS actuaries report
The Office of the Actuary predicted a 4.5% increase in prescription drug spending. Fitch Senior Director Mark Pascaris — who, along with Holoran, is a lead nonprofit hospital analyst at the firm — said those projections are consistent with growth in the sector, which Fitch expects to continue in 2025. Actuaries' predicted 3.7% boost in home healthcare spending also makes sense, Pascaris said.
The personal healthcare spending category additionally includes dental services; nursing home and continual care facilities; durable and non-durable medical products; other health, residential and personal care; and “other” professional services not included in the other subcategories.
The office projected a 3.3% increase in the net cost of health insurance, defined as the difference between premiums and the claims or losses paid by companies.
The miss on pricing for Medicare Advantage in 2024 — in which insurers faced higher-than-expected medical costs and utilization among older adults — will lead companies to explore ways to catch up, said Brad Ellis, senior director and Fitch's lead health insurance analyst.
Government administration spending, including the administrative cost of running various health programs, is expected to increase 2.5%. But spending on government public health activities, meaning organizing or delivering health services or controlling health problems, is projected to decrease 4.4%.
The drop reflects the winding down of Cares Act funding, said Pascaris. Although the decrease may seem dramatic, he said, "Core day-to-day spending is going to continue apace."
But it's tough to accurately predict what changes to healthcare policy and spending are coming given the new presidential administration and a razor-thin House of Representatives majority, analysts said.
"It's kind of the Wild West now," Ellis said.
