Future US Healthcare Visions 2023

Future US Healthcare Visions 2023

Reading time: about 4 min

Summary  

The US healthcare industry is facing challenging economic conditions with high inflation rates, a healthcare-worker shortage, and endemic COVID-19, which is causing concerns about the industry outlook. However, based on updated and expanded projections, the industry's profit pools are expected to grow at a CAGR (Compound Annual Growth Rate) of 4% from $654 billion in 2021 to $790 billion in 2026. Several segments, such as Medicare Advantage within payers, ambulatory surgery centers within providers, software and platforms within healthcare services and specialty pharmacy within pharmacy services, can expect higher growth. On the other hand, the outlook for some segments, such as general acute care and post-acute care within providers and Medicaid within payers, has worsened compared to previous analyses. The industry also faces a shift towards Medicare, led by growth in the over-65 population of 3% per year, but Medicaid enrollment could decline by about ten million lives over five years due to recent legislation. Overall, the estimated profit pools for the government segment are expected to be about 50% greater than the commercial segment by 2026, as Medicare Advantage penetration is expected to reach 52% in 2026.  

Chart from McKinsey & Co article. Click on the image for the complete article or below.

Predictions & Opportunities  

Inflation, healthcare-worker shortages, and endemic COVID-19 are expected to continue to affect the US healthcare industry's outlook. However, commercial and Medicare Advantage segments, physician offices, healthcare services and technology (HST), and specialty pharmacy segments are predicted to grow the fastest. The industry is expected to face difficult conditions in 2023, with continued high inflation rates and labor shortages. The mix of payer profit pools is expected to shift further toward the government segment, with Medicare Advantage and the commercial segment predicted to return to historical levels by 2026 offsetting the shift from fully-insured to self-insured businesses. Finally, labor costs and administrative expenses are predicted to reduce payer EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) by about 60 basis points in 2022 and 2023 combined.  

At the same time CMS is opportunistically primed to deliver on several mission strategies for; addressing healthcare equity, continued access to affordable coverage, delivering human-centered care innovation, managing necessary stewardship of programs and engaging multiple partners across policy and execution processes. Based on the predictions and opportunities outlined, CMS leadership, stakeholders and policymakers may want to consider the following adaptations:  

• Focus on growth in profitable segments: Given the projected growth in Medicare Advantage, ambulatory surgery centers, HST, and specialty pharmacy segments, leadership may want to strategize and focus on these areas to maximize profitability with providers and beneficiaries given some of the sector's headwinds.  
• Address the impact of endemic COVID-19: As COVID-19 becomes more endemic, stakeholders may need to prepare for increased healthcare costs related to COVID-19 prevention and treatment. Additionally, CMS stakeholders may need to proactively address the long-term impact of long COVID on patients and the healthcare system.  
• Mitigate the impact of inflation and labor shortages: Given the challenging economic conditions facing the industry, CMS policymakers may need to develop strategies to mitigate the impact of inflation and labor shortages. This could include exploring new models of care delivery and reimbursement, as well as investing in technology ventures and workforce training and development to increase efficiency.  
• Monitor & Adapt segment shifts: As the government segment is projected to be 50% larger than the commercial segment by 2026, stakeholders will need to monitor the impact of policy changes and Medicare Advantage penetration on profitability and reimbursement rates. Additionally, CMS may need to adjust its business models and operations to accommodate shifts in payer and enrollment trends, such as a potential shift from fully-insured to self-insured businesses in the commercial segment. This could include exploring new pricing and reimbursement models and developing strategies to retain customers in a competitive marketplace.  
• Develop partnerships: CMS can work with healthcare providers, payers, and technology companies to develop innovative solutions that improve patient care and reduce costs. This could include partnerships with hospitals and health systems to create accountable care organizations (ACOs), which are networks of providers that work together to coordinate care for patients, or with technology companies to develop tools that help patients manage their health.  
• Invest in technology: CMS technologists can invest in technology to create more efficient and cost-effective systems. This could include utilizing data analytics to identify patterns and make data-driven decisions, implementing telehealth services to increase access to care, and developing mobile apps for patients to manage their healthcare. 

For the complete article: https://www.mckinsey.com/industries/healthcare/our-insights/what-to-expect-in-us-healthcare-in-2023-and-beyond