CMS just announced that U.S. healthcare spending increased 4.6% in 2019 to $3.8 trillion, which accounted for 17.7% of the GDP. In contrast, the general inflation rate in 2019 was approximately 1.8%. Of course, this was all before coronavirus hit.
Before we get to 2020, these numbers say in a very macro way that none of the cost-reduction efforts foisted on us by CMS and others – MIPS, MACRA, PCMH, ACOs, CPC, CPC+, and so on – have made any measurable dent in the relentless march of healthcare costs sucking resources from the rest of society. We’re still have a 2.5-3% gap between general inflation and healthcare cost growth, which has been the case for roughly 60 years. Now, on to COVID.
A recent estimate published in JAMA was that healthcare costs will rise about 10% this year because of the burden of COVID treatments. This will be balanced against fewer treatments such as elective surgeries, so take all these numbers with a grain of salt. But just assuming the 10% increase means that healthcare costs in 2020 will chew up 19.6% of the GDP.
But this estimate doesn’t take into account the hit to the overall economy. A worst-case estimate is that COVID will cause up to an 8.7% decrease in the GDP. This means that the healthcare spend would actually be 21.4% of GDP. A more modest estimate for the overall economy shrinkage might be closer to 2.4%, which still leaves the healthcare spend at greater than 20% of the GDP.
Economists make projections that look a lot smoother than real life experience. Will the healthcare spend ever get back to the high 17s%? I seriously doubt it.
The more important question is will the shock of COVID to our economic and healthcare systems embolden the American people and its elected officials to try even more radical reforms in the near future? Unfortunately, I doubt that too.
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