Caution towards CMS Data Sources for Healthcare Legislation

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Regarding biopharmaceutical spending, policymakers should stay cautious of the sources which they use as a basis to develop legislation, as there is consistent discrepancy in the data. 

Annually, the Centers for Medicare and Medicaid Services (CMS) report out 10-year projections for national health expenditures. These accounts track health spending by funds, service, and sponsor. The data is used by policymakers as guidance for how healthcare spending will evolve and directs future legislation and regulations. 

The analysis was conducted using the national health expenditure projection reports analyzing the data from the years 2015-2019 for biopharmaceutical spending. The percentage of actual spending growth for prescription drugs was compared to the projected growth from the preceding reports. For example, projected spending growth for 2015 from 2015-2025 National Healthcare Expenditure (NHE) report was compared to the actual spending growth from the NHE 2016-2025 report. Similar comparison was conducted for the years 2016-2019. Analysis did take into consideration adjustments to actual spending in subsequent reports.

Table 1 demonstrates the projected versus actual growth for years 2015-2019. The average overestimation of spending growth for biopharmaceuticals was 1.8% with the largest difference of 3.7% occurring in 2016, a difference of 12 billion dollars. The projections did underestimate spending growth in 2015 and 2019. Graph A is a visual depiction of the data.

Table 1

Year Predicted Actual
2015 8.1 9.0
2016 5.0 1.3
2017 2.9 0.4
2018 3.3 2.5
2019 3.2 4.3
2020 3.0 n/a

Graph A

There was a pattern of discrepancy observed between the projections and the actual values for all the years from 2015-2019.  The average overestimation in spending was 1.8% which is approximately $5.5-6.5 billion dollars. 

It is important to note that CMS continues to make adjustments regarding actual spending values. For example, a significant change in actual spending was observed for 2016 upon reanalysis in 2018, which brings into question the quality of the methodology and data.  It is important to note that most policymakers depend on projections to implement policies to address the cost of healthcare. In addition most media coverage focuses on projections rather than actual past spending. Hence, significant discrepancies in data may lead to the wrong policy solutions applied to address the healthcare spending conundrum in the U.S. 

Policymakers rely on accurate and timely data when implementing legislation or regulation to address biopharmaceutical spending in the U.S. Based on this research, policymakers may want to utilize other sources in addition to NHE data provided by CMS when making policy recommendations. 

Gauri Binoy is a Pioneer Institute researcher. She graduated from Cornell University in May 2021 with a BA in Biological Sciences and Developmental Sociology.


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