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Costs & Spending

The spending growth rate for private health insurance is projected to remain high, at 8.1 per cent, in 2024 (exhibit 2). This expected rate re flects gains in 2024 of 4.6 million more enrollees to direct-purchase plans — increased enrollment that is related to the temporary special enroll ment period and the extension of the enhanced Marketplace subsidies through 2025. 1 Growthin total out-of-pocket spending is projected to slow to 6.7 percent in 2024, from its elevated rate of 7.9 percent in 2023, as growth in utilization slows across most major services and goods (ex hibit 3). 1 Over the course of 2025 – 26, average spending growth for private health insurance is expected to slow to 3.8 percent (exhibit 3). This rate in cludes expected growth of just 2.4 percent in 2026, when the IRA ’ s extension of enhanced Marketplace subsidies expires, resulting in an enrollment decline of 7.3 million (or 19.2 per cent) in direct-purchase insurance. 1 Out-of pocket spending growth is expected to slow fur ther during 2025 – 26, averaging 3.7 percent, mainly because of the IRA ’ s implementation of the $2,000 annual Part D out-of-pocket spending cap and because 2026 is the first year with lower gross prices for negotiated drugs, which in turn serve to lower beneficiaries ’ out-of-pocket payments. For the latter years of the projection period, 2027 – 32, spending growth for private health in surance is expected to average 4.8 percent, which is below that of Medicare and Medicaid spending, driven primarily by a comparatively slower pace of enrollment growth. Among all of the major payers, out-of-pocket spending is pro The earlier years of the projection period are expected to reflect divergent trends in spending and enrollment patterns as the health sector transitions away from pandemic related policy effects.

minations of Medicaid eligibility for beneficia ries who no longer qualify for the program. Most Medicaid services are projected to have experi enced similar slowdowns in spending growth. As states ’ redeterminations of eligibility con tinue in 2024, Medicaid enrollment is projected to decline by 10.2 million, or 11.2 percent (exhib it 2). This significant reduction in the number of people enrolled is expected to result in a 2.2 per cent decrease in Medicaid expenditures. On a per enrollee basis, the Medicaid spending growth rate is projected to climb to 10.2 percent in 2024 from 5.2 percent in 2023, its highest in crease since 1991, and to reflect the rapid loss of many enrollees who tended to be younger and healthier, and thus less expensive. During 2025 – 26, Medicaid spending is pro jected to grow 5.7 percent, on average, with av erage Medicaid enrollment growth near zero ( − 0.2 percent) (exhibit 2). Among services and goods, average spending growth is strongest for other health, residential, and personal care because of states ’ continued expansions and use of home and community-based services. Over the course of 2027 – 32, Medicaid spend ing growth is projected to average 6.2 percent, whereas Medicaid enrollment is projected to in crease at a rate of 0.9 percent per year (exhibit 2). Medicaid hospital spending is expected to grow 5.5 percent, on average, but this rate increases to 7.2 percent in 2028, 1 in part because of the expi ration of the disproportionate share hospital payment cap reductions in 2027. Private Health Insurance And Out-Of Pocket Spending Largely reflecting increased growth in the use of health care services and goods, private health insurance spending is ex pected to have increased 11.1 percent in 2023, which is faster than its growth rate of 5.9 percent in 2022, and to have reached $1.4 trillion (exhib it 2). On a per enrollee basis, private health in surance spending on services and goods is ex pected to have grown 8.0 percent in 2023. Private health insurance enrollment is expected to have grown more rapidly in 2023 (2.9 percent compared with 1.5 percent in 2022), an acceler ation that reflects the enrollment of an addition al 3.2 million people in direct-purchase plans coinciding with the temporary special enroll ment period and the IRA ’ s extension of en hanced Marketplace subsidies through 2025. 1 In 2023, out-of-pocket spending is expected to have reached $508.6 billion and to have in creased 7.9 percent (compared with 6.6 percent in 2022), resulting from faster growth in the use of services and goods (exhibit 3). The out-of pocket share of total health spending, however, is expected to have remained unchanged from 2022, at 10.6 percent in 2023. 1

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Health Affairs July 2024 43:7

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