Physician services spending could reach $1 trillion this year

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American spending on physician and clinical services could surpass $1 trillion this year, according to a financial forecast published in June.

“National Health Expenditure Projections, 2023-32: Payer Trends Diverge As Pandemic-Related Policies Fade,” said health care spending growth is predicted to outpace the nation’s gross domestic product (GDP) in the next 10 years. Health care spending is projected to account for 19.7% of the GDP by 2032, up from 17.3% last year, according to the figures published in Health Affairs.

The COVID-19 pandemic has had repercussions for the nation’s overall health spending, but those effects will change in coming years, with states redetermining eligibility for Medicaid enrollment and subsidies ending for those who purchase health insurance through the Health Insurance Marketplace created by the Affordable Care Act.

“As time passes, the COVID-19 pandemic and associated temporary spending and enrollment effects are expected to retreat, and health spending and enrollment patterns are expected to resemble their longer-term trends more closely and to be driven to a greater extent by traditional economic and demographic factors,” the study said.

Physician and clinical services

Physician and clinical services spending was estimated at $959.1 billion last year, up 8.4% from $884.9 billion in 2022. That figure is expected to hit $1.1 trillion in 2025 and could reach $1.52 trillion in 2032, when the total national health expenditure is projected to top $7.7 trillion, according to the forecast. The increase comes largely from spending growth for private health insurance and Medicare, up 8.8% and 8.6%, respectively, beating growth rates from 2022.

“For private health insurance, physician and clinical services spending growth is projected to have accelerated in 2023, in part because of faster enrollment growth in Marketplace plans,” the forecast said. “In 2023, the rate of price growth for these services is estimated to have remained somewhat low – and unchanged – at 0.5 percent, partially because of modest Medicare physician fee schedule updates.”

This year spending growth will slow down to 4.9% for physician and clinical services, with Medicaid spending on those services expected to drop 4.8% due to declining enrollment, and Medicare slowing spending on COVID-19 vaccinations.

In 2025 and 2026, the study said spending growth for physician and clinical services is expected to remain stable, averaging 4.8%. Annual growth is projected at 5.5% for the years 2027 to 2032, with Medicare experiencing the fastest spending increase at an average of 7.9% as enrollment swells with an expected 8 million new beneficiaries during that time.

Overall expenditures

Overall, in 2023, health care spending is projected to have grown by 7.5%, reflecting “broad increases in the use of health care,” with an estimated 93.1% of the population having health insurance. This year, Medicaid enrollment is expected to drop significantly as states continue redetermining eligibility of people who were covered by Medicaid during the COVID-19 pandemic. At the same time, the forecast said private health insurance enrollment will increase due to subsidies under the Inflation Reduction Act (IRA) of August 2022, along with enrollment by people who lost Medicaid coverage.

Annual hospital spending growth is forecasted to grow from 2.2% in 2022 to 10.1% in 2023, reaching $1.5 trillion in expenditures. That spending growth is expected to slow to 4.6% in 2024, then average $4.7% a year in 2025 and 2026, and average 5.6% a year from 2027 to 2032, the study said.

For prescription drugs, spending growth slowed to 7% in 2023, when it reached $434.1 billion. This year, growth is expected to reach 6.8%, with a number of factors affecting overall spending. For example, Marketplace enrollment decreases, high-cost drugs losing patent protection, new drug development, and the IRA provisions for negotiating drug prices all could affect the overall spending.

The figures come from sources including the U.S. Centers for Medicare & Medicaid Services and the U.S. Department of Commerce.