Breaking Four Trillion
By Jared Dashevsky, MD
Breaking Four Trillion
U.S. healthcare spending reached $4.1 trillion ($12,530 per person) in 2020, increasing 9.7% year-over-year. What’s particularly interesting about these stats compared to previous years is where spending increased and decreased.
Healthcare expenditures made up around 20% of the gross domestic product (GDP) in 2020 compared to 17.6% in 2019. Overall, the country’s GDP declined 2.2% in 2020, which may explain the increase in the share of healthcare expenditures. Here’s where expenditures increased in 2020 compared to 2019:
- Federal government spending on healthcare increased 36% in 2020, driven mainly by increased spending on hospitals and providers, public health activity and Medicaid/CHIP payments. Medicaid/CHIP enrollment increased from 372.3k to 11.5 million from March 2020 to May 2021. The federal government also picked up a greater share of states’ Medicaid expenses to ease financial burdens caused by the pandemic.
Here’s where expenditures decreased year-over-year:
- Out-of-pocket spending declined 3.7%, likely mirroring decreased healthcare utilization. The decline in enrollment in employer-sponsored insurance is also attributed to the slowdown in out-of-pocket spending.
- Private business spending on healthcare declined 3.1% due to decreased premiums and, for self-insured employers, decreased healthcare utilization by their employees.
- State and local government spending decreased 3.1% since there was a 7% reduction in Medicaid expenditures. Recall that the federal government covered a greater share of states’ Medicaid costs.
Will the Trend Continue?
Covid-19 didn’t go anywhere in 2021. I suspect that total healthcare spending will only decrease slightly in 2021 since the government is spending billions of dollars on vaccines but not so much on supportive legislation compared to 2020. People are also returning to use healthcare services but need less intensive (expensive) treatment. And, physicians have become better and better at treating Covid-19, so hospital spending should continue to decrease. If I had to put a number on it, I’d estimate $3.8 trillion, give or take a billion. What do you think?
Weight-Loss Company Raises $100 Million for More Holistic Care
Weight care management startup Found raised $100 million in Series B funding at a $600 million valuation. With the new year right around the corner, is there a better time to raise money for weight-loss interventions?
Found integrates personalized coaching, online community and prescription medication to help people focus on what they can find in their weight loss journey, like being able to complete a 5k. That is, to find more meaning in weight loss than just losing weight.
Talk Business to Me
Found’s total addressable market is huge: Obesity prevalence in the U.S. is approaching 50% and the global market for weight management is expected to reach $259.1 billion by 2025 at a compound annual growth rate of 9.3% (2020 to 2025). Found isn’t the only one in the weight-loss management space:
- Noom is a health coaching and calorie-tracking app that doubled its revenue during the pandemic as demand for weight-loss management products surged. In May, it raised $540 million in Series F funding valued at $3.7 billion.
- Calibrate focuses on metabolic health by integrating physician visits, FDA-approved medications and app-based coaching and curriculum. The company raised a $100 million Series B round in August.
My Two Cents
The pandemic had a significant impact on people’s psyche and physical health — 42% reported they gained more weight than they intended. Weight management startups have the potential to redirect people’s behavior to help them lose weight and prevent downstream health effects like diabetes and heart disease. At the same time, studies on GLP-1 analogue Semaglutide — a type 2 diabetes medication – show the medication is also an effective add-on medication to help people lose weight (and maintain it). Weight loss management apps + Semaglutide may be a promising cocktail.
Employers See Record-breaking Spike in Insurance Costs
While the average cost for employer-sponsored health insurance (ESI) increased 3.4% in 2020, it rose 6.3%, totaling $14,542 per employee, in 2021. The 6.3% increase is the highest annual increase since 2010, outpacing inflation and employee earnings growth. So why the jump, and should employers expect such a cost increase in 2022?
Explaining the Spike
The uptick in ESI costs is likely due to more people resuming care in 2021, which they previously delayed in 2020 because of the pandemic. At a more granular level, small employers (50-399) saw a 9.6% increase in ESI costs, while large employers (>399) saw a 5% increase. This difference may make sense: small employers are more likely to offer fully-insured health plans and not be self-insured, unlike large employers. Self-insured employers generally save costs since they have better control over healthcare spending.
Employers Favorite Game: Cost-shifting
Usually, when healthcare costs increase for employers, they shift some of it back to the employees (cost-shifting). However, that didn’t seem to happen in 2021. Employers didn’t raise deductibles or implement other cost-sharing measures, and some employers even decreased deductibles to reduce employees’ out-of-pocket costs.
Employers suspect the 6.3% increase in ESI costs is a temporary correction of a low 3.4% year-over-year increase in ESI costs in 2020. On the flip side, the 6.3% increase could be the start of a new trend of higher-cost growth. Here are some potential areas of high/low costs I’m thinking about:
- Late detection of cancers due to delayed screenings, leading to more intense and acute care, increasing costs.
- Low acuity Covid-19 infections due to protective effects of vaccinations, decreasing hospital care costs compared to pre-vaccination times.
- Increased employer investment in mental health care, leading to increased worker productivity and, therefore, decreased costs of unproductivity.
OUTSIDE THE HUDDLE
- Much to Texas’s chagrin, the FDA will permanently allow abortion pills by mail without the need to visit a provider.
- A mighty $17 million in Series B funding will help Mightier use video games to help children regulate their emotions.
- In a massive blow to the Sackler family, a federal judge overturned a $4.5 billion bankruptcy settlement protecting the Sackler family from future litigation. Purdue Pharma argues this will threaten its ability to provide funds to those suffering from the opioid crisis.
- Here are the Rock Health and the Stanford Center of Digital Health’s digital health adoption survey. 2021 is the first year in which live video was the most used telemedicine modality. Don’t forget, phone calls, apps, messaging, emails and pictures all fall under the “telemedicine” umbrella.
- After months of negotiations, Centene has settled with Politan Capital Management and will see its CEO since 1996, Michael Neidorff, end his tenure, among other restructuring. The news was well-received, with shares up 3% on Tuesday following the announcement.
- Pfizer has released the final Phase 2/3 study results for Paxlovid (its oral antiviral Covid-19 treatment), and the results are still promising. The risk of hospitalization or death was reduced by 89% if taken within three days of symptom onset.
- Doximity released their report on physician compensation by specialty. I’m moving to Charlotte, NC, and becoming a neurosurgeon. Jokes aside, the findings again show blatant wage gender disparities, which we discussed last week.
- We’ve been counting down the days till Christmas on Instagram and sharing our healthcare version of “all we want for Christmas” each day. If you haven’t been following along, check it out!