Our $7.7-Trillion Burning Platform: A Stark Moment for U.S. Healthcare

June 14, 2024
The CMS Actuaries’ newest spending projections are challenging healthcare as never before

The level of Jungian synchronicity was rather astonishing, really: at our Healthcare Innovation Rocky Mountain Summit on Wednesday, I had literally just referenced the fact that I was anticipating an announcement at any minute from the Medicare program actuaries on their projections for overall U.S. healthcare system spending, projections that they share every year at this time. And within an hour of my referencing the actuaries, CMS (the Centers for Medicare & Medicaid Services) had announced to the press under embargo, the new numbers.

And the numbers are mindblowing. As Senior Contributing Editor David Raths wrote in an article posted later that day, “National health spending for 2023 is projected to have grown at a rate of 7.5 percent, with expenditures reaching $4.8 trillion, according to a study from the Office of the Actuary (OACT) at the Centers for Medicare and Medicaid Services (CMS). Health spending over the course of 2023–32 is expected to grow 5.6 percent per year on average, leading to a projected $7.7 trillion in overall spending by 2032.”

And that eye-popping $7.7 trillion surpasses what the actuaries had projected a year ago this week, on June 14, 2023: that “total national health spending will reach $7.2 trillion by 2031 and grow from the 18.3 percent of gross domestic product (GDP) that it was in 2018, to 19.6 percent by 2031.” The new numbers from CMS also indicate that the percentage of GDP will rise from the previous 18.3-percent estimate to 19.7 percent by 2032. Indeed, if the U.S. economy were not in a sustained period of expansion right now, that percentage might have been even higher.

But consider this: last year, the CMS actuaries found that our nation was spending $4.4 trillion on healthcare; now, one year later, they are finding that we’re spending $4.8 trillion annually. With numbers this large, it can be difficult to grasp how much $400 billion is. It’s a lot. And even with a spending growth rate of “only” 5.6 percent per year, we are moving into absolutely uncharted territory in terms of the overall cost of the U.S. healthcare system. Because $7.7 trillion is a huge figure—HUGE. There’s no way around it.

Now, the reality is that the United States, like all the advanced industrialized nations, has an aging population and is experiencing an explosion in the presence of chronic disease in the population (most ominously, even among children and teenagers now). Indeed, some advanced nations, including Italy and Japan, are facing a tsunami of aging, with such a rapid increase in their elderly populations that their social-welfare spending is becoming imperiled overall. Nevertheless, those advanced nations are still spending only two-thirds of what we are, per capita, on healthcare. So as expensive as their healthcare systems are, they are not in the red zone that we are.

So what’s to be done? The discussions that he had at our Rocky Mountain Summit were incredibly timely, in the context of these new healthcare spending numbers, because all those presenting agreed that we need to advance internal healthcare system reform as rapidly as possible, while at the same time re-visioning the policy and payment system that keeps the healthcare system going. As R. Lawrence “Larry” Moss, M.D., the president and CEO of Nemours Children’s Health, the only multi-state children’s health system in the country, noted, among the OECD nations, the U.S. ranks 33 out of 38 for life expectancy; 38 out of 38 for infant mortality’ 38 out of 38 for maternal mortality; 38 out of 38 in obesity (with obesity rates twice those of the other OECD nations); and 38 out of 38 in avoidable mortality. In his keynote speech, Dr. Moss noted that the U.S. healthcare system is “great at rescue medicine, the best” at caring for patients with emergency health conditions; yet “terrible” at “health.” And he shared the heart-rending story of Wendell, a ten-year-old boy whom he treated as a pediatric surgeon just out of residency, and who ripped a gash in one leg while playing in a trash can, because of the lack of afterschool kids’ programs in his neighborhood. As a result of the injury, Wendell experienced necrotizing fasciitis and had to have that leg amputated, and needed skin grafters across more than 85 percent of the skin on his body. And the cost was more than $2 million at that time, and could amount to tens of millions across his lifetime. Dr. Moss called for this nation to invest in the health of children, and to turn the current paradigm on its head, by building healthy children.

Meanwhile, Robert Groves, M.D., executive vice president and chief medical officer at the Phoenix-based Banner | Aetna, described the tremendous advances that he and his colleagues are involved in at their organization, which merged a health plan and a health system several years ago, and is focused on empowering physicians and other clinicians to create change. As Dr. Groves told me in his fireside-chat keynote session, there is simply no substitute for engaging physicians and bringing them into the equation as co-changemakers. All the things that we as a healthcare system need to do in order to advance the health of patients with chronic diseases, will require ginormous physician engagement and buy-in; and he and his colleagues are creating that at Banner | Aetna, and year-over-year statistics are proving it.

Meanwhile, Jim Whitfill, M.D., chief transformation officer at the Phoenix-based Honor Health, offered fascinating insights on where artificial intelligence might be taking our healthcare system over the next several years. Of course, not everything is rainbows and unicorns, and Dr. Whitfill was very clear in pointing out areas of potential concern that everyone needs to be aware of and manage. But what is clear, as he pointed out, as that we’re going to need AI more than ever, in both its traditional and generative forms, in order to turbocharge the effectiveness of physicians and nurses in a healthcare system that is reeling from staffing shortages and operating costs.

And we had terrific discussions around the social determinants of health, telehealth and virtual health, behavioral health, and of course, cybersecurity, as well. All the presenters and panelists are leaders in their organizations, which are themselves leader organizations, and everyone is focused on moving the needle in healthcare in this country.

And that speaks to that ginormous $7.7 trillion figure. Ultimately, the aging of the population in this country means that healthcare will costs will continue to grow, no matter what we do as a healthcare system and as a society; and that will be true for all the advanced industrialized nations as well. But if ever there were a burning platform for healthcare system change, it would have to be the realization that we as a nation are set to spend one-fifth of our productive wealth on healthcare.  There is simply no way to overstate the enormity of that figure, nor of the other figures involved here.

But here’s the thing, and this is something that I discussed with Dr. Groves in our fireside keynote session. Having been in healthcare publishing for 35 years now, what is tremendously heartening is to see the transformation (still incomplete, but tremendously advanced from three-and-a-half decades ago) of the physician culture in our healthcare system. As I noted to Dr. Groves, and he agreed, 35 years ago, medical students were trained to be “lone wolf” clinicians, and virtually no energy or effort was put into helping medical students think about team-based care. Now, medical schools are strongly emphasizing to their students that the world in which they will practice will necessarily involve team-based care delivery—as well as the continuous measurement of their clinical interventions. And that is as it must be. All the physician leaders on our program on Wednesday agreed that we can no longer afford the fee-for-service system-based view of healthcare delivery as being limited to one-on-one encounters between physicians and patients. That is particularly true given that the vast bulk of expense of our healthcare system going forward will be on chronic disease care and management, with a large plurality of our population living with one chronic illness, and many living with two, three, or even four chronic diseases.

So that $7.7-trillion burning platform is facing us, full on. But it is heartening to share the stage at our Summits with wonderful physician leaders and leaders of all kinds, as we work together to improve our healthcare system and learn how to manage the tremendous collective set of tasks of caring for our nationwide population in sickness—and yes, in health. And for all the huge challenges facing us, knowing that leaders like the ones who presented at our Rocky Mountain Summit, are helping to lead the charge, is heartening indeed.

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