Health Spending Post-Pandemic: Looking for High Value Beyond the Headlines

NPC Chief Science Officer Dr. Sharon Phares takes a closer look at CMS' national health expenditure report and what their predictions mean for our health care system.

The most recent National Health Expenditure report from the Centers for Medicare & Medicaid Services reminds us that we need to look beyond the headlines about increased health care spending. Digging a little deeper into the data to get a complete picture provides a much more nuanced story.

Overall, the report showed that spending rose 9.7% in 2020. In a normal year 9.7% would seem high, but 2020 was far from a “normal year.” Federal programs designed to help the nation recover from the worst of the COVID-19 pandemic boosted spending even as utilization and visits to the doctor’s office dropped during the first year of the pandemic. Looking ahead from  2021 to 2030, CMS predicts national health spending will grow at an average of 5.1% per year, with an anticipated cost of $6.8 trillion in 2030.

The number is large, even eye-popping. Yet it’s important to point out that the report also shows that the proportion of Gross Domestic Product devoted to health care spending will remain relatively stable. In other words, we will spend about the same percentage of GDP each year on health care as we have been spending already, consistent with the growth in the economy.

Rising spending in and of itself is not necessarily alarming. The U.S. population is getting older and requiring more health services. New treatments and cures make a difference in actual health outcomes and should be celebrated as innovations that improve patients' lives.

Even though prescription drug spending continues to dominate much of our public debate about health care costs, the CMS report shows that drug spending is getting more attention than it deserves. Growth in drug spending is projected to be nearly the same as spending growth for other services, 5.2% annually. And research here at the National Pharmaceutical Council shows the value to patients and to the health care system overall that medications have provided.

Unfortunately, not every dollar we spend in health care is spent well, and some estimate that up to 25% of health care spending is wasted. Now that we are emerging from the pandemic, we need to examine how to create more incentives for high-value care that genuinely helps patients and improves health outcomes.

As policymakers look at the latest figures from CMS, we at NPC are committed to helping them with the research that can guide them toward making evidence-based decisions on what is wasteful and what is worthwhile.