Deloitte Predicts Deceleration in Health Spending as a Percentage of GDP by 2040, Creating $3.5 Trillion 'Well-Being Dividend'

Actuarial analysis shows deceleration in spending will be driven by new business models, emerging technologies, and highly engaged consumers who will be even more focused on well-being as a result of the pandemic

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Deloitte

Feb 08, 2021, 09:04 ET

NEW YORK, Feb. 8, 2021 /PRNewswire/ --

Key takeaways

Sources: American Society of Civil Engineers; U.S. Congressional Budget Office; Federal Reserve Bank of New York; U.S. Department of Education; National Conference of State Legislatures

By 2040, Deloitte estimates health spending will be $8.3 trillion. The $3.5 trillion difference (by 2040) between Deloitte's model and the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary's projection is what Deloitte calls a well-being dividend.
In 2019, about 80% of health spending went toward care and treatment. By 2040, Deloitte expects 60% of spending will shift toward proactively improving health and well-being, especially as the country rebounds from the global pandemic and addresses its full societal impact.
A new health economy, different from today's business models, will drive 85% of revenue with three major changes likely impacting incumbent health care stakeholders: 1) the end of the general hospital as we know it; 2) the slowdown of mass-produced biopharma; and 3) a seismic shift in the way health care is financed.

Why this matters
In 2019, health care spending in the United States topped $3.8 trillion dollars — nearly 18% of the gross domestic product (GDP) — as projected by the CMS Office of the Actuary. Prior to the COVID-19 pandemic, the agency 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. Although the pandemic caused people to defer care throughout much of 2020, a rebound and then continuation of the trends beyond 2021 could drive health care spending to historic levels in the coming years. The continued upward trend, however, is unlikely to endure as outlined in a new Deloitte report titled, "Breaking the cost curve: Deloitte predicts health spending as a percentage of GDP will decelerate over the next 20 years." Deloitte 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.

Future realities
Deloitte predicts three realities will take shape by 2040:

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 difference between CMS's projection and Deloitte's model is about $3.5 trillion. Deloitte refers to this decrease in spending as a well-being dividend.
A shift in spending: The U.S. health care system has historically focused on the treatment of diseases. For every $100 spent on health care, about $80 is typically spent diagnosing and treating patients after they become sick. 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.
A new health economy, different from today's business models, will drive 85% of revenue as a result of three major transformations:

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.
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.
The change in how health care 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.

Key quote
"Consumers have the power, and desire, to demand more personalized care from their provider — care that looks at their medical history compared to the social realities of their specific situation and lifestyle. We expect these empowered consumers will reward organizations that are focused on keeping them healthy. Those organizations that respond by personalizing health care in ways that are scalable to large populations can enable better outcomes at a lower cost and can realize the promise of a future that puts well-being at the center, eliminates waste from our health care economy and uses a significant well-being dividend to better our society as a whole."

- Neal Batra, principal, Deloitte Consulting LLP, and Deloitte's life sciences and health care practice

How $3.5 trillion, freed up from health care spending, can help the U.S. economy
The U.S. government, private enterprises and consumers can invest this well-being dividend in areas of potential societal impact such as improving the infrastructure and reducing household debts.

The "Breaking the cost curve: Deloitte predicts health spending as a percentage of GDP will decelerate over the next 20 years" report can be found on Deloitte Insights. Connect with us on Twitter at @DeloitteHealth.

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SOURCE Deloitte