CMS projects rising labor, supplies costs will drive 2022 price inflation

CMS projects rising labor, supplies costs will drive 2022 price inflation

Healthcare prices are expected to rise this year, driving up out-of-pocket expenses, CMS’ Office of the Actuary said Monday.

Price growth will fuel healthcare spending inflation in 2022, stemming from providers’ higher labor and supplies costs, according to a report in Health Affairs released Monday. Prices are expected to rise by 3.6% in 2022 and boost overall healthcare spending growth 4.6%. Prices grew 2.7% in 2021, 3.1% in 2020 and 1.1% in 2019.

As a result, out-of-pocket costs are projected to climb around 6% each year from 2021 to 2030.

Hospital-related spending was the largest component of the $4.3 trillion U.S. healthcare bill in 2021, accounting for more than 31%. That share is expected to increase to nearly 33% in 2030, according to the report. Hospital spending growth will accelerate to 6.9% in 2022, up from 5.7% in 2021, 6.4% in 2020 and 6.3% in 2019.

“The demand for hospital care is expected to remain high in 2022,” Andrea Sisko, an economist for the CMS Office of the Actuary, said during a Monday morning press call.

U.S. healthcare spending inflation fell from a record high 9.7% in 2020 to 4.2% in 2021 as the government scaled back financial aid meant to offset pandemic-related losses, according to the report. The healthcare sector is expected to still consume roughly one-fifth of the country’s total economic output by 2030, which aligns with past projections.

“Our expectation is spending on federal healthcare programs will begin to normalize and decline from all-time highs in 2020,” John Poisal, deputy director for CMS’ national health statistics group, said during Monday’s press call. “By 2025, expenditures will likely transition back to the traditional drivers of health spending.”

Actuaries modeled their estimates under the expectation that the public health emergency will end this year. Expenditure data from 2021 through 2030 are estimates, officials noted.

The pandemic upended typical healthcare spending patterns as the government accounted for the vast majority of 2020 expenditures, while spending related to health insurance, out-of-pocket and third-party payers plunged from 2019 to 2020. That dynamic is expected to shift back to historical trends, with government healthcare expenditures projected to decline from 2021 to 2030 as state and federal reimbursement rate-cutting programs like sequestration restart.

Enrollment in employer-sponsored health plans was expected to significantly drop during the pandemic as people lost their jobs. But private health insurance enrollment only fell by about 2 million in 2020; it is expected to fully rebound in 2022. Overall coverage slightly increased from 2019 to 2020 as Medicare and Medicaid enrollment jumped.

Physician services spending is anticipated to increase 6.2% in 2022, up from 5.1% in 2021. However, Medicare spending growth on those services will likely slow as physician fee schedule payment rates decline, according to the report.

Retail prescription expenses are expected to rise 4.3% in 2022, incrementally increasing through 2030 as expensive drugs come to market and utilization ramps up. Pharmaceutical spending increased 4.7% in 2021, up from 3% in 2020 and 4.3% in 2019.

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Marie Maynes
Marie Maynes is a Sports enthusiast and writes for the Sports section of ANH.