Analysts at the Centers for Medicare and Medicaid Services (CMS) released their annual projections. These projections “estimate significant increases in both overall and out-of-pocket costs for home care, nursing facilities, and continuing care communities (CCRCs) through” 2030. If accurate, these rising costs could force consumers, providers, and the federal government to face difficult decisions about paying for healthcare needs in the U.S. Here, we examine the predicted cost increases – including LTSS costs, trends influencing the projections, and the potential impact on insurance.
Forecasted Increases
Overall health costs are projected to increase through 2030. This is due in part to the ongoing effects of the COVID-19 pandemic. The most significant cost increase is expected to be seen for “long-term supports and services [LTSS] as well as post-acute care such as physical therapy.”
Influential Trends
Costs for LTSS and post-acute care are anticipated to rise at a higher rate due to two factors:
- A rise in pricing overall and
- An increase in the number of people requiring care (e.g., “older adults and younger people with disabilities”).
How those trends play out numerically is projected as follows:
- Consumer households and the government will experience an increase at an average of 7% over the next seven years.
- Annual healthcare costs for individuals will likely increase above an average of 9% through 2030.
- Home health costs will likely “double from $113 billion in the pre-pandemic year of 2019 to $226 billion by 2030.”
- For consumers, out-of-pockets costs will increase from under $13 billion in 2019 to over $27 billion at the end of the decade.
- Labor costs for home- and community-based services (HCBS) providers – such as aides, nurses, and therapists – are projected to grow by more than 7% per year through 2029, with a slight drop to approximately 6.5% in 2030.
- Costs for nursing homes and CCRCs are predicted to rise more slowly, at an average of 3% to 4.5%.
- Skilled nursing facilities and HCBS providers are projected to see “a slower increase in Medicare payments” and “lower payments from Medicare Advantage managed care plans.”
Long-Term Care Insurance
By 2030, CMS predicts Medicare and Medicaid will be spending a combined $300 billion per year “for home care and nursing facilities.” Analysts believe this may not be sustainable for the programs, which will put additional pressure on consumers to investigate other options, such as private long-term care insurance and inflation protection.
The rise of health care costs, including hourly fees for aides, has led some consumers to eliminate or decrease their “automatic annual benefit increases” or reduce their inflation protection. These changes to how consumers are setting up their insurance coverage may increase pressure on Medicare and Medicaid to keep up with unmet needs.
“Projecting health care costs [is always] an uncertain exercise.” However, the following realities make it much more likely that CMS’s projections for LTSS and post-acute care will be accurate:
- An ongoing shortage in the U.S. for direct support professionals and other health care workers.
- Increasing numbers of older adults and younger people with disabilities who will need care over this decade.
- “Increased levels of frailty among patients” and the lingering impact of the COVID-19 pandemic, which carries its own range of risks and long-term health needs that are still being discovered and better understood.
To read the full annual CMS predictions, click here.