U.S. health spending projected to exceed $7T in 2031

National health expenditures will surpass $7 trillion and consume nearly one-fifth of the U.S. economy in 2031, according to projections the Centers for Medicare and Medicaid Services' Office of the Actuary published Wednesday.

Healthcare spending will rise by an average of 5.4% a year from 2022 through 2031, when it will reach $7.17 trillion, or 19.6% of gross domestic product. "Health spending over the course of the next 10 years is expected to grow more rapidly, on average, than the overall economy," CMS actuaries wrote in the journal Health Affairs.

The Office of the Actuary, which is independent from CMS leadership, projects that the government, businesses and households spent $4.44 trillion on healthcare in 2022—4.3% more than the prior year—or 17.4% of GDP. Healthcare spending grew more slowly than the economy last year, according to the report. Healthcare expenditures grew 2.7% in 2021, 10.3% in 2020 and 4.2% in 2019, the year before the COVID-19 pandemic began. The CMS actuaries will issue their final tally of national health spending for 2022 near the end of this year.

Short-term trends will be influenced by diminished severity of the pandemic and the end of massive federal support for the healthcare system during the public health emergency, the actuaries wrote. Similarly, related economic conditions drove a large increase in Medicaid enrollments, which states are winding down. Over time, policy changes such as Inflation Reduction Act of 2022 provisions targeting prescription drug costs will tend to constrain spending while others, such as enhanced health insurance exchange subsidies, will tend to increase expenditures, according to the Office of the Actuary.

Hospital spending is projected to increase an average of 5.8% annually during the 10-year period, compared to 5.3% for physician and clinical services and 4.6% for prescription drugs, the actuaries project. In 2031, hospital spending will reach $2.34 trillion dollars, according to the report.

The private sector, comprising businesses and households, will pay for 51% of health expenditures in 2031, slightly less than the current share, while the government will finance the remainder. Health insurance companies will spend $2.06 trillion on healthcare in 2031, compared with $1.85 trillion by Medicare and $1.2 trillion by Medicaid, the actuaries predict.