National Healthcare Spending Reaches $5.3 Trillion in 2024
Overview of Spending Growth
According to a recent report from CMS actuaries, national healthcare spending in the United States has surged to $5.3 trillion in 2024. This increase reflects a continued high demand for healthcare services as Americans recover from the coronavirus pandemic. Growth in healthcare expenditures has consistently outpaced that of the overall economy, resulting in healthcare’s share of the U.S. gross domestic product rising from 17.7% in 2023 to 18% in 2024. The findings were detailed in a report released on Wednesday in Health Affairs.
Factors Influencing Healthcare Spending
The rapid growth in healthcare spending was not primarily caused by rising costs for goods and services. Instead, CMS actuaries attributed this trend to heightened consumer demand for medical care and shifts in the types of healthcare consumed. Micah Hartman, a statistician with the CMS Office of the Actuary, stated, “Prices are a factor. They’re part of the equation. But non-price factors were the driver.”
Significant Growth Trends in Healthcare Utilization
Increased Demand for Medical Care
The report confirms that payers experienced a significant increase in medical spending in 2024, particularly among private insurers who reported that demand for care exceeded expectations. This strong demand has placed pressure on the healthcare sector while simultaneously benefiting hospitals, doctor’s offices, and other providers.
Continuing Trends into 2025
Payers anticipate that high utilization rates will persist into 2025, driven by the increasing burden of hospital care, greater needs for behavioral health services, and the rising use of expensive GLP-1 drugs for weight management. However, CMS actuaries noted that the future of healthcare spending remains uncertain due to potential demographic shifts, regulatory changes, and technological advancements.
Personal Healthcare Spending Growth
Historical Context of Spending Increases
CMS actuaries indicated that the extreme demand for medical care has resulted in a notable rise in personal healthcare spending—expenditures directly utilized by patients. The years 2023 and 2024 marked the sharpest growth in personal healthcare spending seen in over three decades, averaging an annual increase of 8.9%. This growth rate has not been observed since the early 1990s when economic conditions spurred a surge in personal healthcare spending.
Contributions to Overall Healthcare Expenditures
In 2024, overall U.S. healthcare expenditures increased by 7.2%. Notable contributions to this growth included hospital care, physician and clinical services, as well as retail prescription drugs. Hospital care, which accounted for $1.6 trillion in 2024, experienced an 8.9% increase from 2023. Conversely, spending on physician and clinical services rose by 8.1%, while retail drug spending grew by 7.9%, influenced by the demand for GLP-1s.
Government Spending on Healthcare
Federal Expenditures and the ACA
In 2024, the federal government remained the largest contributor to U.S. healthcare spending, amounting to $1.7 trillion, or approximately one-third of total expenditures, marking a 5.5% increase from the previous year. A significant factor driving this growth was the rising taxpayer burden associated with more generous subsidies for Affordable Care Act (ACA) plans, with the U.S. spending $149.5 billion on ACA marketplaces in 2024.
Medicare and Medicaid Spending Trends
Medicare continued to be the largest single source of healthcare spending, accounting for 21% of total expenditures in 2024. Meanwhile, Medicaid spending growth decelerated as states began eligibility checks following the COVID-19 pandemic, leading to millions of low-income individuals losing coverage. Despite this, spending per enrollee surged by 16.6%, as those remaining in Medicaid tended to require more expensive care.
Impact on Households and Employers
Household Expenditures on Healthcare
In 2024, U.S. households spent $1.5 trillion on healthcare, reflecting a growth rate of 6.9%, comparable to the previous year. Although spending on Medicare and private health insurance premiums accelerated, this was counterbalanced by slower growth in out-of-pocket expenses like co-pays and deductibles.
Private Business Health Spending
Private businesses’ health spending reached $967.4 billion in 2024, primarily directed toward covering employees’ health insurance. This significant investment underscores the ongoing financial commitment businesses have toward employee health and wellness in an evolving healthcare landscape.