June 27, 2025 • 19 mins
Health Affairs' Jeff Byers is joined by Michael Chernew from Harvard Medical School to discuss the recently released National Health Expenditures Projections for 2024–33 from the Office of the Actuary (OACT) at the Centers for Medicare and Medicaid Services (CMS).
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Episode Transcript
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Jeff Byers (00:08):
Hello, and welcome to Health Affairs This Week. I'm
your host, Jeff Beyers. We'rerecording on 06/20/2025. Today
on the program to talk aboutCMS's recent health spending
projections that we released onHealth Affairs on June 25, I
have Michael Chernew fromHarvard Medical School to talk
(00:29):
about the projections. Michael,welcome back to the program.
Michael Chernew (00:32):
Yes, thank you so much for having me.
Jeff Byers (00:33):
For someone interested in health care, but
maybe not health policy, what isthe headline of these new
projections?
Michael Chernew (00:40):
I I think the headline is that health care
spending as a as a share of GDP,that's national income. Gross
domestic product rose to roughlyeight percent 2024. And that
acceleration, frankly, was a bitsurprising. If you go back to
this article, there's one likethis produced every year. They
were projecting roughly 5%.
(01:02):
So it was much faster growththan, was projected originally,
which I think just illustrateshow hard it is to project.
Jeff Byers (01:09):
And listeners, if you are interested, we've been
publishing this data from CMSfor about thirty years now. So
we have a rich collection ofthese projection articles and
expenditure articles. Theexpenditure article likely will
come out in December of thisyear. So this is just the latest
rounds of that. The projectionsshare that health care share GDP
(01:32):
will reach about 20% by 2033.
So we've kinda heard this figurebefore and that health care will
nearly hit a fifth of the GDP.So this is impressive, but is
there a way to contextualize thesignificance of this? So just
saying a fifth of the economy islike, okay. Cool. But, like, if
I'm a lay person, like, whatdoes that mean to me?
Michael Chernew (01:53):
Well, I think it's hard to imagine anything as
a percent of GDP. So one way tothink through this number
overall is that per capita,that's about gonna be about
$25,000. Now there's gonna beinflation there. So $25,000 in
2033 will be a little bit lessthan $25,000 now. But the point
(02:15):
is it's about the cost of asmall car.
I think the key thing to thinkabout, though, is what we're
getting for that money. So insome articles like this that are
focused on spending, we seespending rising as a share of
GDP, and we focus on that andthink, Oh my god, a 50 economy
(02:38):
is going to GDP, dollars 25,000per person going to healthcare,
and we think, boy, that's a lotof money. And it is a lot of
money, and it's certainly moremoney than it was before, and we
worry a lot about how we'regoing to finance that money. But
other articles that you'd alsofind in health affairs talk
about people's access to careand new technologies and better
(02:59):
cancer care and things we'regetting. And so it's really that
trade off from a perspective ofpolicymakers.
I think the core challenge ishow to make sure that people get
access to the health care thatthey need to get in the most
efficient way possible. And sowe have a core conundrum between
access to new services, betterservices, services that keep us
(03:19):
healthy, and how we financethose services.
Jeff Byers (03:23):
And what factors might change in these
projections? So there's talks ofinsurance coverage, policy
changes, etcetera. Can you breakthat down a little bit?
Michael Chernew (03:32):
A general point is there's a lot of different
ways to look at theseprojections. You can look at it
by sector, Medicare, Medicaid,commercial. You can look at it
by type of healthcare service,hospitals, physicians, drugs.
And so depending on how you lookat it, you can answer some of
those factors, those questionsdifferently. Two things that I
would note, one of them ishealthcare prices, particularly
(03:53):
in the commercial sector.
So healthcare prices in thecommercial sector are a big
deal, and we think a lot abouthow to regulate healthcare
prices in the commercial sector,or at least how to make markets
more competitive so healthcareprices in the commercial sector
don't rise as rapidly. In thepublic sector, as an aside,
healthcare prices rise much,much more slowly, so we have to
think about prices. The otherthing that I think is important
(04:16):
when you're thinking about theseservices and these projections
is is called the volumeintensity part, the utilization
part. So about half of thegrowth relative to GDP is in
more utilization and about halfis in higher prices. And that
higher price is concentrated inthe commercial sector.
But the new stuff, the newutilization, the core question
(04:39):
is, is that getting us the valuethat we would like? In 2024,
there was roughly an 8% increasein spending. And what is unknown
and what is very hard to tellfrom these types of analyses is
what did we get for that 8%? Arewe happy we had 8% more
spending? Did we get stuff welike?
Or are we sad we got 8% morespending because it's just
(05:02):
wasted health care?
Jeff Byers (05:03):
Yeah. Is there a way to measure that? I know it's a
different pay kind of paper,but, like, how are people
looking into the value or thesentimental value or the margin
utility value of health careservices that they actually are
used.
Michael Chernew (05:19):
Yeah, you should never ask an academic, is
there a way to measure that?Because the answer's obviously,
of course there is. I would loveto be able measure The short
answer I'll give you is there'sobviously a way to measure that.
You could look over time atchanges in mortality. You could
look over time at changes inmorbidity and a bunch of things
like that.
But those things, well,mortality is easy enough to
measure, morbidity is muchharder to measure. But I think
(05:40):
the core point is in theofficial statistics, we don't
measure that as closely as onemight, and it's even hard, if
you look at this paper, to breakout spending by disease
category. So, for example, howmuch is in cancer? There's a lot
of changes in the way we treatcancer, and by and large, I
think most of your listenerswould say that's a good thing.
(06:01):
We like improvements in cancercare, but it is hard to know.
In this particular era, one ofthe things that people focus on,
and again, I think as an overallcontributor, it's probably
small, but as a category just byitself is probably growing
rapidly, would be things likeskin substitutes. So most people
(06:21):
don't walk around thinking aboutwhether they need different
types of skin substitutes,mostly because it's gross, But
one has to think through in aclinical category like that, are
things just priced too highly?Can we think about the prices?
Are we using these new types ofskin substitutes in the
appropriate situations? Are weusing them too much?
A whole bunch of things likethat. And that type of
(06:43):
microanalysis is difficult toweave in to the sort of macro
story we're talking about today.
Jeff Byers (06:49):
Yeah. And I'd imagine it's also would probably
be somewhat hard to just, like,keep creeping the scope of a
particular paper like this,which is meant to just kinda
project
Michael Chernew (07:00):
Absolutely. Absolutely. And so it's hard to
go to that one stop paper thattells you this is all the nuance
of what's going on becausethere's just so much nuance.
Jeff Byers (07:11):
Yeah. Well, listeners can read the pages of
health affairs to find all theintersections that other
researchers are tackling on whenit comes to the intersection of
spending and utilization. Isthere anything of note regarding
the intersection of trends likeinsurance coverage in like
Medicaid or in the aging ofAmerica at all with this paper?
Michael Chernew (07:33):
I mentioned before the different sectors,
commercial, Medicare, Medicaid,and they certainly interact. So,
you know, one of the thingsthat's happening here is we're
sort of moving past the pandemicyears and the pandemic years
were a real challenge forforecasters because one, we
didn't anticipate the pandemicand there was a dramatic
(07:55):
reduction in utilization duringthe pandemic, and then there's a
bounce back post the pandemic,knowing how much that pent up
demand was, all the other thingsis sort of very challenging. But
one of the things that happenedwas there was a lot more people
that stayed on Medicaid and nowwe're rotating some of those
people off into other types ofcoverage. So there's a shift
between Medicaid and commercialas that happens. There's
(08:18):
obviously a big impact of peopleaging onto Medicare.
So if you look at Medicarespending, about half of that,
roughly speaking, is due to newpeople enrolling in Medicare,
aging into Medicare, and thatthose people are, of course,
coming out of the commercialsector. So there's connections
between the enrollments betweenthe sectors, and I think that's
(08:40):
probably the the biggestconnection between them, and
we'll have to see. We're comingoff a period of sort of record
low uninsurance. We're gonnahave to see as we move forward
how the uninsurance rateevolves. The so the office of
this paper had to makeassumptions about how people are
gonna move between the sectors.
Jeff Byers (08:58):
Okay. So you mentioned uninsurance rates to
check out, and you mentionedskin substitutes. Are there any
particular areas of eitherspending or slices of this data
that are of particular interestto you or in the way from a
health economist lens? Like,we've talked about the agent of
America. I think that's, like,something that a lot of
(09:19):
listeners and researchers knowabout.
Is there any other sorts oftrends or ideas within this data
that would be interesting tonote?
Michael Chernew (09:28):
I spend a lot of time thinking about Medicare
policy, and so I always aminterested in what the
projections are for the Medicareprogram. And one thing that's
important to understand is thatI think it's pretty well
accepted and true that onereason why health care in The
United States costs more thanother countries is because we
pay more in The United Statesthan other countries. But if you
(09:50):
look at spending growth in theMedicare program, that's split
essentially between growingnumber of enrollees, and I
mentioned that earlier, andvolume and intensity
utilization. Price growth inMedicare is actually projected
to be below inflation, and sothis ends up being important in
how we think about policy forMedicare because we certainly
(10:16):
aren't going to undertakepolicies that change the
demographics of, you we wantpeople on Medicare because
people are going to age and wewant them to age into Medicare.
And so the question is, how dowe manage Medicare per enrollee
growth?
And that turns out not to be somuch of a price issue. There are
(10:36):
particular Medicare policy priceissues that I think are
important. We can talk aboutrepricing different codes that
might be overpriced. We can talkabout site neutral payments,
which is balancing paymentsbetween, say, physician offices
and hospitals. But those arerelatively small issues in the
big picture of things.
I think the core thing to manageMedicare is to think about how
(10:57):
we manage the volume andintensity growth in Medicare,
which is projected to be higherthan, say, price growth. And the
mechanisms we put in place to dothat are important. How we deal
with the price growth inMedicare is important so the
system can sustain that level ofslow price growth in the
Medicare program, and I think wereally need to think through
(11:17):
that and how to maintainefficiency. And the reason why
Medicare matters, and Medicaidas well, is because all of this
is done in the context of theAmerican fiscal situation. So we
don't have time, and honestly, Idon't want to have a debate
about the fiscal situation inthe country, but I think it is
fair to say that healthcare isan important part of that fiscal
(11:39):
situation.
And it just becomes moreimperative than ever to figure
out how to deliver high qualityhealthcare efficiently. And
that's pretty much of a cliche.I've probably been saying that
for the past ten years, butevery year I say this is the
most important year. It reallyis highlighted this year. And
you know what, Jeff?
(12:00):
It is really highlighted thisyear. We simply can't handle 8%
growth overall, Medicarespending growth that much more
rapid than GDP growth. That isjust a real financing problem
for the country, and so wereally need to think about that.
And the way we need to thinkabout that is a little bit on
price, but largely on theefficient delivery of health
(12:20):
care services.
Jeff Byers (12:22):
Yeah, don't debate them cowards. So it's
interesting you bring up that. Ihad this question, I think your
answer dovetails into thisquestion quite nicely as we
begin to wrap up. Justreflections on the phrase
bending the cost curve and wherehealthcare sits today. You kinda
alluded to some of your thoughtson this.
I've seen some recent arguments,I think from Lauren Adler, but
(12:44):
don't quote him or me on that,that we may have actually made
strides on bending the costcurve. As we've been discussing,
one of the things I thoughtabout is it's hard to get a
primary care doctor appointmentsometimes. Do we just gatekeep
appointment times, and that'show we're bending the cost per
curve by curbing utilization?Like, from a health econ
(13:04):
standpoint, what are yourreflections on this phrase?
Michael Chernew (13:06):
So there's no doubt that, you know, relative
to say the early two thousands,we have bent the cost curve.
There's a well known New YorkTimes piece that shows sort of
what their projection was andwhat their trajectory was and
what their trajectory actuallyplayed out to be. And there was
a dramatic bending of the costcurve, which is a ton of money.
(13:28):
And of course, I think thequestion is the way you framed
that, Jeff, well, are we justgatekeeping primary care docs? I
actually don't think that'strue.
I think Okay. Well, I take thatback. I do think there's a lot
of problems with getting accessto primary care. I don't think
that's why health care spendinggrowth has slowed. I think there
were changes in think there werechanges in the rate of
(13:50):
introductions of newtechnologies.
We were moving things out of thehospital, which is less costly.
We were some of the reallyexpensive drugs were going off
patent. There were a lot ofdifferent things in sort of the
way in which we deliverhealthcare that were changing
that helped us bend the costcurve. But what I take away from
this report is healthcarespending growth seems to be
(14:12):
back. And if you look to thisreport, they're projecting in
this report that health carespending, which in 2024, 2025
was very rapid relative to GDP,will slow down.
But still, by the end of thisperiod, they're projecting
roughly a one percentage pointgap between health care spending
growth and national incomegrowth, GDP. And so essentially
(14:35):
and again, we should take allforecasts with a grain of salt,
but if you take this forecastfor what it is, it is projecting
that we're going to return tomore cost growth. For a long
time, healthcare spendingstabilized in sort of the mid
17% of GDP. And this reportshows you we're going from
roughly, you know, mid 17% ofGDP up to, as you mentioned at
(14:58):
the beginning, 20 plus percentof GDP. So we're back on that
upward trajectory.
So the core question that Ithink facing society is, has the
cost curve this is a bad term,maybe you should have Lauren on,
if indeed it was Lauren, hecould speak more eloquently is
it unbent? And what can we do tore bend it for some version of
(15:19):
that? Should we just accept itbecause we're getting good
stuff? Like, again, I think ifwe're getting good stuff, maybe
we can tolerate more spending,but I'm a little skeptical that
all of the higher spending isjustified, and I think we need
to redouble our efforts to tryand keep ensuring that we're
getting value for what we'respending, both in terms of
paying a price that'sjustifiable and getting the
(15:42):
value of services that we wantgiven what we're spending.
Jeff Byers (15:45):
Thanks for that. So maybe final question on that.
You know, life is long. Healthexpenditures and projections
take a while to see themselvesthrough as far as, like, the
data goes. So you're talkingabout this today.
We might not see the fruits ofthat unbending for, like, a
couple of years now. Is thereanything that we should be
(16:06):
thinking about or doing inbetween that time as the, trend
lines become clear?
Michael Chernew (16:11):
First, let me say these projections, and this
is a little bit technical, aredone on what's called a current
law basis, meaning they assumethat health care policy stays
the same, that the current lawstays the same. So all the stuff
that happens in sort of a policybasis can affect what happens
here. But I think what we needto do, broadly speaking, is we
(16:32):
need to think of the way inwhich we pay providers. I spend
a lot of my time thinking abouthow we pay providers, how we
regulate prices, how we regulatethe general types of services to
get introduced and theincentives that people face for
using those sets of services.And those types of sort of small
health policy decisions, andthey're never small when you're
(16:55):
doing them, but those types ofindividual policy decisions end
up mattering a lot.
And how we think aboutsupporting that type of
innovation is going to matter.So there is a ton of work, and
again, you mentioned on thepages of Health Affairs, about
all of the debates about howwe're going to manage, you know,
again, we haven't talked a lotabout Medicaid, but Medicaid is
front and center. And so whenone thinks about spending in
(17:18):
places like Medicaid, one has toask, are we getting the care
that we want for the people thatneed that care and can we get
that same care more efficiently?Can we make sure there's no
fraud, waste, and abuse in waysthat don't deny care to people
who we really wanna get care?And these are all the sort of
core questions that underliethis article.
Every year, this article gets aton of attention because it
(17:41):
provides you a really big macroview of where the health care
system is going, but that macroview is made up of many, many,
many subcomponents ofactivities. It's made up of the
interplay of medicalintervention, innovation and
incentives, medicalconsolidation and prices, what
we're doing in terms ofsupporting coverage or not in
(18:03):
the country. All of those thingsmatter. How we're enabling
people to manage their health,how we're treating people's
health in general, all thosethings matter. And so you have
to hope that the underlyingactivities that are going on
will help us at a minimum getmore health for what we're
spending and hopefully be ableto lower spending and maintain
(18:24):
sort of that improvement inhealth.
Jeff Byers (18:26):
Fantastic. Good breakdown of that. Michael
Chernew, as we wrap up, is thereanything on the projections that
we haven't gone over that youthink would be important to note
before we head out?
Michael Chernew (18:36):
No, Jeff. I think this is a pretty
comprehensive discussion. I willwait to see the response the
replies that you get from thelisteners. Oh my god. I cannot
believe you did not talk aboutpart b drugs or, you you really
should have hit harder on whatwe're doing in this or that
aspect of healthcare policy.
But from my point of view, thisis pretty comprehensive and I
always like talking to you.
Jeff Byers (18:57):
For anyone that wants to sound off in the
comments, Spotify has comments.We'd love to hear from you.
Michael Chernew, thanks forjoining us today on Health
Affairs This Week. If you, thelistener, enjoyed this episode,
please share it with the healtheconomists in your life, and we
will see you we're off for twoweeks, and then we'll see you in
two weeks for a summer break.Bye.
Hello, and welcome to Health Affairs This Week. I'm
your host, Jeff Beyers. We'rerecording on 06/20/2025. Today
on the program to talk aboutCMS's recent health spending
projections that we released onHealth Affairs on June 25, I
have Michael Chernew fromHarvard Medical School to talk
(00:29):
about the projections. Michael,welcome back to the program.
Michael Chernew (00:32):
Yes, thank you so much for having me.
Jeff Byers (00:33):
For someone interested in health care, but
maybe not health policy, what isthe headline of these new
projections?
Michael Chernew (00:40):
I I think the headline is that health care
spending as a as a share of GDP,that's national income. Gross
domestic product rose to roughlyeight percent 2024. And that
acceleration, frankly, was a bitsurprising. If you go back to
this article, there's one likethis produced every year. They
were projecting roughly 5%.
(01:02):
So it was much faster growththan, was projected originally,
which I think just illustrateshow hard it is to project.
Jeff Byers (01:09):
And listeners, if you are interested, we've been
publishing this data from CMSfor about thirty years now. So
we have a rich collection ofthese projection articles and
expenditure articles. Theexpenditure article likely will
come out in December of thisyear. So this is just the latest
rounds of that. The projectionsshare that health care share GDP
(01:32):
will reach about 20% by 2033.
So we've kinda heard this figurebefore and that health care will
nearly hit a fifth of the GDP.So this is impressive, but is
there a way to contextualize thesignificance of this? So just
saying a fifth of the economy islike, okay. Cool. But, like, if
I'm a lay person, like, whatdoes that mean to me?
Michael Chernew (01:53):
Well, I think it's hard to imagine anything as
a percent of GDP. So one way tothink through this number
overall is that per capita,that's about gonna be about
$25,000. Now there's gonna beinflation there. So $25,000 in
2033 will be a little bit lessthan $25,000 now. But the point
(02:15):
is it's about the cost of asmall car.
I think the key thing to thinkabout, though, is what we're
getting for that money. So insome articles like this that are
focused on spending, we seespending rising as a share of
GDP, and we focus on that andthink, Oh my god, a 50 economy
(02:38):
is going to GDP, dollars 25,000per person going to healthcare,
and we think, boy, that's a lotof money. And it is a lot of
money, and it's certainly moremoney than it was before, and we
worry a lot about how we'regoing to finance that money. But
other articles that you'd alsofind in health affairs talk
about people's access to careand new technologies and better
(02:59):
cancer care and things we'regetting. And so it's really that
trade off from a perspective ofpolicymakers.
I think the core challenge ishow to make sure that people get
access to the health care thatthey need to get in the most
efficient way possible. And sowe have a core conundrum between
access to new services, betterservices, services that keep us
(03:19):
healthy, and how we financethose services.
Jeff Byers (03:23):
And what factors might change in these
projections? So there's talks ofinsurance coverage, policy
changes, etcetera. Can you breakthat down a little bit?
Michael Chernew (03:32):
A general point is there's a lot of different
ways to look at theseprojections. You can look at it
by sector, Medicare, Medicaid,commercial. You can look at it
by type of healthcare service,hospitals, physicians, drugs.
And so depending on how you lookat it, you can answer some of
those factors, those questionsdifferently. Two things that I
would note, one of them ishealthcare prices, particularly
(03:53):
in the commercial sector.
So healthcare prices in thecommercial sector are a big
deal, and we think a lot abouthow to regulate healthcare
prices in the commercial sector,or at least how to make markets
more competitive so healthcareprices in the commercial sector
don't rise as rapidly. In thepublic sector, as an aside,
healthcare prices rise much,much more slowly, so we have to
think about prices. The otherthing that I think is important
(04:16):
when you're thinking about theseservices and these projections
is is called the volumeintensity part, the utilization
part. So about half of thegrowth relative to GDP is in
more utilization and about halfis in higher prices. And that
higher price is concentrated inthe commercial sector.
But the new stuff, the newutilization, the core question
(04:39):
is, is that getting us the valuethat we would like? In 2024,
there was roughly an 8% increasein spending. And what is unknown
and what is very hard to tellfrom these types of analyses is
what did we get for that 8%? Arewe happy we had 8% more
spending? Did we get stuff welike?
Or are we sad we got 8% morespending because it's just
(05:02):
wasted health care?
Jeff Byers (05:03):
Yeah. Is there a way to measure that? I know it's a
different pay kind of paper,but, like, how are people
looking into the value or thesentimental value or the margin
utility value of health careservices that they actually are
used.
Michael Chernew (05:19):
Yeah, you should never ask an academic, is
there a way to measure that?Because the answer's obviously,
of course there is. I would loveto be able measure The short
answer I'll give you is there'sobviously a way to measure that.
You could look over time atchanges in mortality. You could
look over time at changes inmorbidity and a bunch of things
like that.
But those things, well,mortality is easy enough to
measure, morbidity is muchharder to measure. But I think
(05:40):
the core point is in theofficial statistics, we don't
measure that as closely as onemight, and it's even hard, if
you look at this paper, to breakout spending by disease
category. So, for example, howmuch is in cancer? There's a lot
of changes in the way we treatcancer, and by and large, I
think most of your listenerswould say that's a good thing.
(06:01):
We like improvements in cancercare, but it is hard to know.
In this particular era, one ofthe things that people focus on,
and again, I think as an overallcontributor, it's probably
small, but as a category just byitself is probably growing
rapidly, would be things likeskin substitutes. So most people
(06:21):
don't walk around thinking aboutwhether they need different
types of skin substitutes,mostly because it's gross, But
one has to think through in aclinical category like that, are
things just priced too highly?Can we think about the prices?
Are we using these new types ofskin substitutes in the
appropriate situations? Are weusing them too much?
A whole bunch of things likethat. And that type of
(06:43):
microanalysis is difficult toweave in to the sort of macro
story we're talking about today.
Jeff Byers (06:49):
Yeah. And I'd imagine it's also would probably
be somewhat hard to just, like,keep creeping the scope of a
particular paper like this,which is meant to just kinda
project
Michael Chernew (07:00):
Absolutely. Absolutely. And so it's hard to
go to that one stop paper thattells you this is all the nuance
of what's going on becausethere's just so much nuance.
Jeff Byers (07:11):
Yeah. Well, listeners can read the pages of
health affairs to find all theintersections that other
researchers are tackling on whenit comes to the intersection of
spending and utilization. Isthere anything of note regarding
the intersection of trends likeinsurance coverage in like
Medicaid or in the aging ofAmerica at all with this paper?
Michael Chernew (07:33):
I mentioned before the different sectors,
commercial, Medicare, Medicaid,and they certainly interact. So,
you know, one of the thingsthat's happening here is we're
sort of moving past the pandemicyears and the pandemic years
were a real challenge forforecasters because one, we
didn't anticipate the pandemicand there was a dramatic
(07:55):
reduction in utilization duringthe pandemic, and then there's a
bounce back post the pandemic,knowing how much that pent up
demand was, all the other thingsis sort of very challenging. But
one of the things that happenedwas there was a lot more people
that stayed on Medicaid and nowwe're rotating some of those
people off into other types ofcoverage. So there's a shift
between Medicaid and commercialas that happens. There's
(08:18):
obviously a big impact of peopleaging onto Medicare.
So if you look at Medicarespending, about half of that,
roughly speaking, is due to newpeople enrolling in Medicare,
aging into Medicare, and thatthose people are, of course,
coming out of the commercialsector. So there's connections
between the enrollments betweenthe sectors, and I think that's
(08:40):
probably the the biggestconnection between them, and
we'll have to see. We're comingoff a period of sort of record
low uninsurance. We're gonnahave to see as we move forward
how the uninsurance rateevolves. The so the office of
this paper had to makeassumptions about how people are
gonna move between the sectors.
Jeff Byers (08:58):
Okay. So you mentioned uninsurance rates to
check out, and you mentionedskin substitutes. Are there any
particular areas of eitherspending or slices of this data
that are of particular interestto you or in the way from a
health economist lens? Like,we've talked about the agent of
America. I think that's, like,something that a lot of
(09:19):
listeners and researchers knowabout.
Is there any other sorts oftrends or ideas within this data
that would be interesting tonote?
Michael Chernew (09:28):
I spend a lot of time thinking about Medicare
policy, and so I always aminterested in what the
projections are for the Medicareprogram. And one thing that's
important to understand is thatI think it's pretty well
accepted and true that onereason why health care in The
United States costs more thanother countries is because we
pay more in The United Statesthan other countries. But if you
(09:50):
look at spending growth in theMedicare program, that's split
essentially between growingnumber of enrollees, and I
mentioned that earlier, andvolume and intensity
utilization. Price growth inMedicare is actually projected
to be below inflation, and sothis ends up being important in
how we think about policy forMedicare because we certainly
(10:16):
aren't going to undertakepolicies that change the
demographics of, you we wantpeople on Medicare because
people are going to age and wewant them to age into Medicare.
And so the question is, how dowe manage Medicare per enrollee
growth?
And that turns out not to be somuch of a price issue. There are
(10:36):
particular Medicare policy priceissues that I think are
important. We can talk aboutrepricing different codes that
might be overpriced. We can talkabout site neutral payments,
which is balancing paymentsbetween, say, physician offices
and hospitals. But those arerelatively small issues in the
big picture of things.
I think the core thing to manageMedicare is to think about how
(10:57):
we manage the volume andintensity growth in Medicare,
which is projected to be higherthan, say, price growth. And the
mechanisms we put in place to dothat are important. How we deal
with the price growth inMedicare is important so the
system can sustain that level ofslow price growth in the
Medicare program, and I think wereally need to think through
(11:17):
that and how to maintainefficiency. And the reason why
Medicare matters, and Medicaidas well, is because all of this
is done in the context of theAmerican fiscal situation. So we
don't have time, and honestly, Idon't want to have a debate
about the fiscal situation inthe country, but I think it is
fair to say that healthcare isan important part of that fiscal
(11:39):
situation.
And it just becomes moreimperative than ever to figure
out how to deliver high qualityhealthcare efficiently. And
that's pretty much of a cliche.I've probably been saying that
for the past ten years, butevery year I say this is the
most important year. It reallyis highlighted this year. And
you know what, Jeff?
(12:00):
It is really highlighted thisyear. We simply can't handle 8%
growth overall, Medicarespending growth that much more
rapid than GDP growth. That isjust a real financing problem
for the country, and so wereally need to think about that.
And the way we need to thinkabout that is a little bit on
price, but largely on theefficient delivery of health
(12:20):
care services.
Jeff Byers (12:22):
Yeah, don't debate them cowards. So it's
interesting you bring up that. Ihad this question, I think your
answer dovetails into thisquestion quite nicely as we
begin to wrap up. Justreflections on the phrase
bending the cost curve and wherehealthcare sits today. You kinda
alluded to some of your thoughtson this.
I've seen some recent arguments,I think from Lauren Adler, but
(12:44):
don't quote him or me on that,that we may have actually made
strides on bending the costcurve. As we've been discussing,
one of the things I thoughtabout is it's hard to get a
primary care doctor appointmentsometimes. Do we just gatekeep
appointment times, and that'show we're bending the cost per
curve by curbing utilization?Like, from a health econ
(13:04):
standpoint, what are yourreflections on this phrase?
Michael Chernew (13:06):
So there's no doubt that, you know, relative
to say the early two thousands,we have bent the cost curve.
There's a well known New YorkTimes piece that shows sort of
what their projection was andwhat their trajectory was and
what their trajectory actuallyplayed out to be. And there was
a dramatic bending of the costcurve, which is a ton of money.
(13:28):
And of course, I think thequestion is the way you framed
that, Jeff, well, are we justgatekeeping primary care docs? I
actually don't think that'strue.
I think Okay. Well, I take thatback. I do think there's a lot
of problems with getting accessto primary care. I don't think
that's why health care spendinggrowth has slowed. I think there
were changes in think there werechanges in the rate of
(13:50):
introductions of newtechnologies.
We were moving things out of thehospital, which is less costly.
We were some of the reallyexpensive drugs were going off
patent. There were a lot ofdifferent things in sort of the
way in which we deliverhealthcare that were changing
that helped us bend the costcurve. But what I take away from
this report is healthcarespending growth seems to be
(14:12):
back. And if you look to thisreport, they're projecting in
this report that health carespending, which in 2024, 2025
was very rapid relative to GDP,will slow down.
But still, by the end of thisperiod, they're projecting
roughly a one percentage pointgap between health care spending
growth and national incomegrowth, GDP. And so essentially
(14:35):
and again, we should take allforecasts with a grain of salt,
but if you take this forecastfor what it is, it is projecting
that we're going to return tomore cost growth. For a long
time, healthcare spendingstabilized in sort of the mid
17% of GDP. And this reportshows you we're going from
roughly, you know, mid 17% ofGDP up to, as you mentioned at
(14:58):
the beginning, 20 plus percentof GDP. So we're back on that
upward trajectory.
So the core question that Ithink facing society is, has the
cost curve this is a bad term,maybe you should have Lauren on,
if indeed it was Lauren, hecould speak more eloquently is
it unbent? And what can we do tore bend it for some version of
(15:19):
that? Should we just accept itbecause we're getting good
stuff? Like, again, I think ifwe're getting good stuff, maybe
we can tolerate more spending,but I'm a little skeptical that
all of the higher spending isjustified, and I think we need
to redouble our efforts to tryand keep ensuring that we're
getting value for what we'respending, both in terms of
paying a price that'sjustifiable and getting the
(15:42):
value of services that we wantgiven what we're spending.
Jeff Byers (15:45):
Thanks for that. So maybe final question on that.
You know, life is long. Healthexpenditures and projections
take a while to see themselvesthrough as far as, like, the
data goes. So you're talkingabout this today.
We might not see the fruits ofthat unbending for, like, a
couple of years now. Is thereanything that we should be
(16:06):
thinking about or doing inbetween that time as the, trend
lines become clear?
Michael Chernew (16:11):
First, let me say these projections, and this
is a little bit technical, aredone on what's called a current
law basis, meaning they assumethat health care policy stays
the same, that the current lawstays the same. So all the stuff
that happens in sort of a policybasis can affect what happens
here. But I think what we needto do, broadly speaking, is we
(16:32):
need to think of the way inwhich we pay providers. I spend
a lot of my time thinking abouthow we pay providers, how we
regulate prices, how we regulatethe general types of services to
get introduced and theincentives that people face for
using those sets of services.And those types of sort of small
health policy decisions, andthey're never small when you're
(16:55):
doing them, but those types ofindividual policy decisions end
up mattering a lot.
And how we think aboutsupporting that type of
innovation is going to matter.So there is a ton of work, and
again, you mentioned on thepages of Health Affairs, about
all of the debates about howwe're going to manage, you know,
again, we haven't talked a lotabout Medicaid, but Medicaid is
front and center. And so whenone thinks about spending in
(17:18):
places like Medicaid, one has toask, are we getting the care
that we want for the people thatneed that care and can we get
that same care more efficiently?Can we make sure there's no
fraud, waste, and abuse in waysthat don't deny care to people
who we really wanna get care?And these are all the sort of
core questions that underliethis article.
Every year, this article gets aton of attention because it
(17:41):
provides you a really big macroview of where the health care
system is going, but that macroview is made up of many, many,
many subcomponents ofactivities. It's made up of the
interplay of medicalintervention, innovation and
incentives, medicalconsolidation and prices, what
we're doing in terms ofsupporting coverage or not in
(18:03):
the country. All of those thingsmatter. How we're enabling
people to manage their health,how we're treating people's
health in general, all thosethings matter. And so you have
to hope that the underlyingactivities that are going on
will help us at a minimum getmore health for what we're
spending and hopefully be ableto lower spending and maintain
(18:24):
sort of that improvement inhealth.
Jeff Byers (18:26):
Fantastic. Good breakdown of that. Michael
Chernew, as we wrap up, is thereanything on the projections that
we haven't gone over that youthink would be important to note
before we head out?
Michael Chernew (18:36):
No, Jeff. I think this is a pretty
comprehensive discussion. I willwait to see the response the
replies that you get from thelisteners. Oh my god. I cannot
believe you did not talk aboutpart b drugs or, you you really
should have hit harder on whatwe're doing in this or that
aspect of healthcare policy.
But from my point of view, thisis pretty comprehensive and I
always like talking to you.
Jeff Byers (18:57):
For anyone that wants to sound off in the
comments, Spotify has comments.We'd love to hear from you.
Michael Chernew, thanks forjoining us today on Health
Affairs This Week. If you, thelistener, enjoyed this episode,
please share it with the healtheconomists in your life, and we
will see you we're off for twoweeks, and then we'll see you in
two weeks for a summer break.Bye.
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