U.S. Healthcare’s “Burning Platform” Has Become a Conflagration

The CMS actuaries’ projection of $8.585 trillion in annual U.S. healthcare expenditures, and 20.3 percent of GDP, by 2033, should be a wake-up call for leaders across the healthcare delivery system.

As they do every year, the actuaries at CMS (the federal Centers for Medicare and Medicaid Services) this summer released their projections for total U.S. healthcare expenditures going into the next several years. The actuaries did so in the form of an article published online on June 25 in Health Affairs, entitled “National Health Expenditure Projections, 2024-33: Despite Insurance Coverage Declines, Health To Grow as Share Of GDP.”

Of course, the actuaries—Sean P. Keehan, Andrew J. Madison, John A. Poisal, Gigi A. Cuckler, Sheila D. Smith, Andrea M. Sisko, Jacqueline A. Fiore, and Kathryn E. Rennie—provided readers with a boatload of statistics and details. But the marquee numbers were absolutely mindblowing, and let’s talk about those first. So actuaries estimated current total U.S. healthcare expenditures at $5.635 trillion in 2025, consuming 18.5 percent of gross domestic product. Meanwhile, they are now predicting that total U.S. healthcare expenditures in 2033 will reach $8.585 trillion, and 20.3 percent of GDP. And that is a 52.35 percent increase. In other words, within the space of the next eight years, healthcare will cost our nation 52.35 percent more than it does now, even as we collectively as a nation can barely afford the total cost of healthcare as it stands right now.

What’s more, healthcare will go from its already-arresting level of 18.5 percent of GDP, to an astonishing 20.3 percent of GDP. In other words, one out of every five dollars spent on anything in the United States in 2033, will be spent on healthcare. Anyone who isn’t shocked by these projections has honestly lost their ability to be shocked—not surprised, but shocked.

What’s more, the Medicare program will go from its current $1.2 trillion to $2.1 trillion in cost—an 82.5-percent increase; while Medicaid will go from its current $925.6 billion to $1.626 trillion, representing a 76-percent increase. Meanwhile, we are currently spending $1.772 trillion on hospital care right now, and that figure will leap to $2.697 trillion, a 52.2-percent increase; while physician-based care will go from $1.123 trillion to $1.676 trillion, a 49-percent increase.

And all these increases will be based on relatively moderate year-over-year inflation rates. As the actuaries note, “During 2028–33, the latter stage of the projection period, national health spending is projected to increase at an average rate of 5.3 percent, whereas GDP growth is projected to average 4.1 percent. Of the 1.2-percentage-point differential, half is attributable to the expectation of faster health price growth (personal health care price growth is projected to average 2.7 percent annually, whereas economywide prices, based on the GDP deflator, are projected to increase by 2.1 percent per year), and the remainder is attributable to comparatively faster expected growth in the use and intensity of health care services and goods.” What’s more, they write, “For 2028–33, although average Medicare spending is expected to increase at a slower rate (7.4 percent) relative to the program’s average spending growth during 2026–27 (8.9 percent), expenditures for Medicare are expected to grow the most rapidly among the major payers. This reflects the continued strong enrollment of the baby-boom generation through 2029, the aging of current beneficiaries, and the expiration of the sequester in 2033. Partially mitigating this trend, however, are expected slower increases in Medicare prescription drug spending, which reflect lower prices associated with negotiated savings on certain high-expenditure pharmaceuticals and the linking of drug price increases to the CPI.”

The simple reality is that we are collectively faced with two factors that are difficult to manage: the first is the aging of the population, something that no one can do anything about; the Baby Boom generation is now moving firmly into the Medicare age bracket, with the youngest boomers, those born in 1964, turning 65 just four years from now, while the oldest Boomers are already in their late 70s. What’s more, the explosion in chronic illness continues forward, with obesity, lack of exercise, and eating/nutritional issues, along possibly with some environmental health issues, inexorably expanding the percentage of Americans living with one or more chronic diseases.

The fact is that the vast bulk of healthcare expenditures going forward will be connected to chronic illness. Yes, of course, there will always be terrible events like car crashes and natural disasters; but underlying chronic illness will be the cause of the bulk of illness in the future.

Meanwhile, the purchasers and payers of healthcare are becoming more anxious—and more insistent—about the need to somehow curb the growth of costs, even in the face of factors that either cannot be controlled at all, like the aging of the population, or those like the ongoing explosion in chronic illness, which can be addressed, as challenging as doing so will be.

But no one could possibly disagree with the need to try. And that is where population health management and care management come in, along with a need to realign the human resources of our healthcare system to more effectively address chronic disease through multidisciplinary team-based care delivery, absolutely facilitated and supported by advanced analytics, including artificial intelligence. And keep in mind that we are going to be experiencing major nursing shortages in the coming years, as well as physician shortages (though the physician shortages will vary extremely widely between and among geographic locations and medical specialties). In any case, anyone who would be in denial about any of those would be foolish.

On the brighter side of things, hospital-at-home programs are blossoming like spring flowers on hillsides, moved forward by teams of innovative clinician and operational leaders in health systems, and by information technology that is finally now capable of addressing the very complex set of elements involved in caring for patients in their homes. And the information and medical technology to support hospital-at-home programs will only advance further over time. The same thing is true about telehealth capabilities.

The bottom line is this: all the leaders of patient care organizations will be faced with a tidal wave of issues over the next couple of decades, issues that will necessarily transform the healthcare system. There has never been a more urgent moment in our system for innovative change.

Fortunately, individuals and teams are emerging who are taking on those issues in new and innovative ways. Indeed, Pam Arlotto, CEO of the Atlanta-based Maestro Strategies consulting firm, and I, will be discussing some of the leadership issues facing the U.S. healthcare delivery system, at our Healthcare Innovation Summits in both Nashville, on September 16, and Houston, on October 16. I hope that some of you can join us in either city. They’re going to be stimulating discussions.

In the end, there’s simply no way around acknowledging that the leaders of the U.S. healthcare system have no choice but to accept the burning platform of cost, demographic change, and other factors, and to move forward with vision and skill. It’s going to be difficult, it’s going to be challenging; but we’re fortunate in this country in that we have amazing, amazing leaders all across our healthcare system. We can do it—and we must.