Breaking the cost curve

Executive summary

In 2019, health care spending in the United States topped US$3.8 trillion dollars—nearly 18% of the gross domestic product (GDP)—as projected by the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary. Prior to the COVID-19 pandemic, the agency had projected health spending would continue to grow at a rate of 5.3% a year, reaching nearly US$6.2 trillion by 2028. If those increases were to continue unabated over the next 20 years, health spending could reach a staggering US$11.8 trillion by 2040. Although the pandemic caused people to defer care throughout much of 2020, a rebound and then continuation of the trends beyond 2021 would drive health care spending to historic levels in the coming years.

The continued upward trend, however, is unlikely to endure, according to models developed by our health care actuaries in collaboration with leaders from our health sector. We anticipate that emerging technologies, an ability to cure and prevent disease (or detect disease in the earliest stages), and highly engaged consumers will lead to a deceleration of health spending between now and 2040. While our actuarial models are based on prepandemic data, we anticipate spending growth will continue to decelerate. We predict three realities will take shape by 2040:

Future reality #1: A US$3.5 trillion well-being dividend. By 2040, we estimate that health spending will be US$8.3 trillion. The US$3.5 trillion difference (by 2040) between our model and CMS’s projection (continued to 2040) is what we call a well-being dividend—the return on investment for tools, systems, or protocols that help consumers to take an active role in their health and well-being (for Deloitte’s definition of well-being, see sidebar, “What is well-being?”).

Future reality #2: A shift in spending. In 2019, about 80% of health spending went toward care and treatment. By 2040, we expect 60% of spending will go toward improving health and well-being. New-generation well-being activities will likely empower consumers to monitor their health through technologies that can sense early signals of disease in asymptomatic people, and address drivers of health early. Activities related to health and well-being are expected to account for nearly two-thirds of spending by 2040.

Future reality #3: A new health economy, different from today’s business models, will drive 85% of revenue. We believe three major changes will likely impact incumbent health care stakeholders, driving more revenue. These include:

• The end of the general hospital as we know it
• The slowdown of mass-produced biopharma
• A seismic shift in the way health care is financed

We have defined 10 archetypes—business models, roles, and functions focusing on well-being and care delivery, data and platforms, and care enablement—that we expect to drive success in the Future of Health^™.

While Deloitte’s projection runs counter to historic trends, we believe the US health care system has already entered the first stage of the Future of Health—a dramatic transformation that we expect will take place over the next 20 years. This future will likely be driven by new business models, scientific and technological breakthroughs, consumers armed with highly personalized data, and regulations that encourage change. We see this as an unstoppable transformation, meaning that it will happen regardless of policy or the actions of individual stakeholders.

Download the PDF to explore what the future of health could look like—a dramatic transformation driven by new business models, emerging technologies, and highly engaged consumers.
 

Innovation starts with insight and seeing challenges in a new way. Amid unprecedented uncertainty and change across the health care industry, stakeholders are looking for new ways to transform the journey of care. Our US Health Care practice helps clients transform uncertainty into possibility and rapid change into lasting progress. Comprehensive audit, advisory, consulting, and tax capabilities can deliver value at every step, from insight to strategy to action. Our people know how to anticipate, collaborate, innovate, and create opportunity from even the unforeseen obstacle.

Learn more at www.deloitte.com/future.