The State of the Care Economy: Why Healthcare Demand Is Outpacing Every Supply Solution

The Numbers Behind the Crunch

Approximately 11,400 Americans turn 65 every day, and that pace holds through 2027. That single fact reframes the entire workforce conversation. This is not a staffing problem that will ease when the economy shifts or when a new cohort of graduates enters the workforce. The demand side of the care economy is structurally larger than it was five years ago, and it keeps growing.

Americans age 65 and older spend $22,356 annually on healthcare, compared to $9,154 for working-age adults. That is a 2.4x multiplier, and adults 55 and older already represent 30% of the US population while consuming 57% of all health spending. Medicare enrollment reached approximately 68.4 million in 2025.

The math is not complicated. More people are entering the highest-utilization years of their lives, and the care economy has to absorb that volume with a workforce that is simultaneously shrinking.

On the latest SHC Insights episode, Alex Acton, Vice President of Marketing and Communication at Supplemental Health Care, emphasized this point: the demand side is set to rise even more over the next couple of years, and health systems need to think differently about workforce planning over the next three, five, and ten years to keep pace.

What Rising Demand Actually Costs

The aging population is only one driver. Medicine itself keeps expanding. In 2025, 2.79 million da Vinci robotic surgery procedures were performed in the United States. CT imaging volume is projected to grow 45% by 2055, with the vast majority of that growth driven by an aging population. Imaging studies are growing at roughly 5% annually while radiology residency positions grow at only about 2%. The gap between what patients need and what the system can train is widening every year.

Then there is the cost side. US net medicine spending reached $606 billion in 2025, up 10.6% in a single year, with a forecast of approximately $800 billion by 2030. GLP-1 drugs alone contributed $14 billion of annual growth, and Medicare Part D GLP-1 spending reached $27.5 billion in 2024. Hospital drug costs rose 13.6%, supply costs rose 9.9%, and total hospital expenses rose 7.5%, while prices charged to payers increased only 3.5%. The gap between what care costs and what payers reimburse is not a rounding error.

Labor sits at the center of all of it. It represents roughly 50% of hospital expenses, and hospital wages increased about 20.3% from February 2020 through January 2024. US health spending overall reached $5.3 trillion in 2024. Family health insurance premiums hit $25,572 that same year.

On the latest SHC Insights episode, Scott Armstrong, Chief Revenue Officer at Supplemental Health Care, described the pressure directly: healthcare executives and health systems across the country are experiencing more pressure than ever when it comes to managing the dollars and cents and margin pressures, and staffing is generally one of the highest spend items for any healthcare system, no matter the setting.

Why the Supply Side Cannot Catch Up

The demand picture would be manageable if the workforce were growing to meet it. It is not. In 2024, 80,162 qualified BSN (Bachelor of Science in Nursing) applicants were turned away from nursing schools, not because they were unqualified, but because nursing schools lacked the faculty to teach them. The faculty vacancy rate at nursing schools sits at 7.8%, and over 13,000 graduate nursing applicants were also denied admission that year.

The pipeline problem compounds a retention problem. According to the National Council of State Boards of Nursing, 40% of registered nurses working today intend to leave the profession by 2029. That represents a potential loss of up to 1.6 million nurses, and a possible national shortfall of roughly 400,000 nurses by 2030. The median age of a registered nurse is currently 50 years old.

Physicians face a parallel trajectory. The Association of American Medical Colleges (AAMC) projects a physician shortage of 13,500 to 86,000 by 2036. The Health Resources and Services Administration (HRSA) puts that number at 140,000 by 2038. Surveys show 85% of physicians report being overworked, and two-thirds are considering employment changes or early retirement. Radiologic technologist vacancy rates reached 18.1%, and up to 42,000 radiologists may be needed by 2033.

Armstrong captured the structural nature of the problem at a state hospital association conference he attended: the conversation shifted from the pipeline to the pipe. The issue is not just that fewer people are entering the profession. The physical capacity to train them does not exist at the scale required.

Immigration has historically served as a pressure valve. About 25.6% of active US physicians are international medical graduates, roughly one in five registered nurses are foreign born, and the immigrant healthcare workforce is estimated at 3.4 million workers. Slower migration flows, visa bottlenecks, and green card backlogs are closing that valve at exactly the wrong moment.

How Geography and Payer Mix Determine Who Feels It Most

The national numbers describe the aggregate. The local numbers describe the crisis. Physician density in Massachusetts is 466 per 100,000 people. In Mississippi, it is 197. The US average is approximately 295. That gap is not a policy abstraction; it determines whether a patient in a rural county can see a specialist within a reasonable distance.

Since 2010, 206 rural hospitals have closed or converted, and 417 additional rural hospitals are currently considered financially vulnerable. About 66.2% of health professional shortage areas are rural. In 2025, the median rural hospital operated at approximately a 2% margin, and roughly 40% operated at a loss.

Payer mix drives much of that pressure. Medicare currently pays hospitals about 82 cents per dollar of care costs. Combined Medicare and Medicaid underpayment totals approximately $130 billion. Inflation-adjusted Medicare physician reimbursement has declined by roughly 33% since 2001. The 2025 reimbursement conversion factor was cut by 2.83%, with only a temporary 2.5% increase in 2026 and no long-term reform in place.

On the coverage side, 24.3 million people enrolled in ACA (Affordable Care Act) marketplace plans in 2025. Proposed 2026 premium increases run around 18%, enhanced subsidies expired after 2025, and Medicaid unwinding affected over 25 million people. A potential increase of 8.2 million uninsured individuals over the next decade would shift even more uncompensated care onto systems already operating at the margin.

What Healthcare and School Leaders Should Do Differently

The data points in one direction: generic workforce strategies will not hold. Armstrong was direct about this on the episode. A rural health system in South Dakota and a large academic medical center in New York City face categorically different problems, and applying the same solution to both is a failure of analysis, not just execution.

Several concrete shifts follow from that reality.

First, retention deserves the same budget attention as recruitment. With 40% of nurses potentially leaving by 2029, the cost of losing an experienced nurse, including the institutional knowledge she carries, is far higher than the cost of keeping her. Health systems that have extended the careers of nurses approaching retirement by moving them into remote coaching or lower-acuity roles have seen measurable results. One example from the episode: nurses who could consult a senior colleague over an iPad were significantly more willing to ask for help than those with a preceptor standing over their shoulder. That behavioral shift accelerates competency development in newer staff.

Second, the contingent labor calculus has changed. A KPMG study found that the fully burdened cost of a contingent laborer is now approximately 5 to 6% less than that of a permanent staff member when all costs are accounted for. Travel nursing rates are not what they were during the pandemic. Systems that are still reflexively avoiding contingent labor based on 2021 pricing are making decisions on outdated data.

Third, workforce planning needs to start earlier in the recruitment cycle. Armstrong described the shift: the staffing industry has moved well beyond filling vacancies with a bill rate. The more effective model addresses permanent hiring support, local per diem pools, direct sourcing, and internal float pool development before a position ever becomes a contingent need. That sequencing matters for cost control.

Fourth, school leaders overseeing health sciences programs or partnering with clinical sites should understand that the faculty vacancy rate of 7.8% at nursing schools is not a distant problem. It directly limits how many qualified clinicians enter the workforce each year. Partnerships between health systems and nursing programs, including financial support and data sharing, are already showing results at systems that have invested in them.

Work With a Partner Who Knows Your Specific Market

The care economy is under pressure on every axis simultaneously: aging demand, constrained supply, rising costs, and a reimbursement environment that has not kept pace. No single solution addresses all of it, and no workforce partner who treats every system the same will be useful for long.

Supplemental Health Care works with health systems across the United States to build workforce strategies that fit the specific geography, payer mix, and staffing model of each client. If the numbers in this post describe pressures your organization is already feeling, contact SHC at www.shccares.com to start a conversation about what a tailored workforce solution looks like for your system.

For the full discussion with Scott Armstrong, including his perspective on retention strategy, contingent labor economics, and what separates the health systems managing this well from those that are not, listen to the complete episode of Supplemental Healthcare’s Insight Series.

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