Health Spending of GDP Could Decrease Over Next Two Decades

Healthcare spending in the United States topped $3.8 trillion dollars in 2019 — nearly 18% of the gross domestic product (GDP) — as projected by the CMS Office of the Actuary.

Prior to the COVID-19 pandemic, CMS had projected health spending would continue to grow at a rate of 5.3% a year, reaching nearly $6.2 trillion by 2028. If those increases were to continue unabated over the next 20 years, health spending could reach a staggering $11.8 trillion by 2040.

However, finance firm Deloitte released a report recently predicting health spending as a percentage of the GDP will decelerate over the next 20 years.

In the new Deloitte report, "Breaking the cost curve: Deloitte predicts health spending as a percentage of GDP will decelerate over the next 20 years," it anticipates that emerging technologies, an ability to cure and prevent disease (or detect disease in the earliest stages), and highly engaged consumers will lead to a deceleration of health spending between now and 2040.

The report predicted three separate areas will take shape by 2040:

1. A $3.5 trillion well-being dividend: Deloitte models show that by 2040, health spending will make up 18.4% of the GDP (about $8.3 trillion), driven by a significant decrease in spending devoted to treatment, and much higher spending on activities and enterprises that sustain well-being. The $3.5 trillion ends up being the difference between CMS's projection and Deloitte's model.
   
   Deloitte advises the U.S. government, private enterprises and consumers could invest this well-being dividend in areas of potential societal impact such as improving the infrastructure and reducing household debts.
   
2. A shift in spending: The U.S. healthcare system has historically focused on the treatment of diseases. For every $100 spent on healthcare, about $80 is typically spent diagnosing and treating patients after they become sick, the report says. In the future, well-being spending is likely to encompass not only the treatment of physical and mental illness, but also investments in data and algorithms that help generate health and well-being insights.
   
3. A new health economy will drive 85% of revenue as a result of three major transformations:
   
   a. The end of the general hospital: Patients who do need care will likely receive it in highly specialized settings that are tailored to service a specific need rather than being a "one-stop" for all disease states and specialties.
   b. The slowdown of mass-produced therapies: As more health data is collected on individual consumers, we expect biopharma companies will be able to drill down and analyze patients, and their conditions, in new ways. The insights generated from this data can be used to develop treatments that are tailored specifically for the individual.
   c. The change in how healthcare is financed: As health-related technology advances in terms of prevention and wellness, some of today's risks may not be around tomorrow. Disease may be detected sooner, or potentially prevented all together through a series of proactive micro-interventions. If this happens, consumers might want insurance products tailored to their risk profile, as driven by their lifestyle and behaviors, as opposed to those designed for a broader population which is the case today.