Total U.S. healthcare spending increased an estimated 7.2% to $5.3 trillion in 2024, largely driven by utilization and more complex services as opposed to pricing increases, according to the Centers for Medicare and Medicaid Services actuaries’ annual estimate.
The analysis, published Wednesday afternoon in Health Affairs and on CMS’ website, pegs healthcare spending at 18% of the broader economy in 2024, up from 17.7% the year prior.
The total also translates to an average of $15,474 spent on healthcare per person in 2024, up from $14,580.
2024 is now the second consecutive year of substantial healthcare expenditure increases after 2023’s 7.4% rise—as opposed to 2022’s 4.8% and the 4.9% average of the six years preceding the COVID-19 pandemic. For comparison, U.S. gross domestic product (GDP) rose by 5.3% in 2024 and 6.7% in 2023.
Study authors told the press at a briefing on Wednesday that the agency hasn’t observed back-to-back elevated healthcare expenditure growth since 1991-1992, when the country had recently experienced an economic recession.
Behind the sustained bump is growth in personal healthcare spending (which excludes nonmedical insurance expenditure, government administration and government public health activities) of 9.4% in 2023 and 8.3% in 2024, according to the analysis.
For the more recent year, that includes a 8.9% rise in hospital care spending ($1.6 trillion in total), a 8.1% rise in physician and clinical services spending ($1.1 trillion in total), and a 7.9% rise in prescription drug spending ($467 billion in total).
Breaking the topline 7.2% healthcare expenditure growth out into different factors, CMS’ actuaries attributed about 1% of the gain to population growth, 2.5% to price increases and 3.6% to remaining nonprice factors such as usage and the greater intensity of delivered healthcare goods and services.
Micah Hartman, a statistician for the National Statistics Group at CMS and the study’s lead author, said at the briefing that the 2.5% overall price increase within healthcare was equal to price growth across the economy. There was a greater jump for hospital prices (3.4%, the highest rate since 2007), but lower increases in physician and clinical services (1.8%, up from 0.6% in 2023) and retail prescription drugs (1.4%, up from 0.6% in 2023).
Hartman instead pointed to increased usage and intensity as the main culprits of the past years’ heightened spending. Though CMS’ data sources prevent its actuaries from teasing out exact breakdowns between the two, he pointed to numbers like a 1.5% increase in hospital days and 3.2% rise in discharges as evidence of a post-pandemic rebound in demand.
“So prices are a factor. They’re part of the equation. But non-price factors are the driver,” he said while noting that both areas are increasing faster than they did prior to the pandemic.
Coinciding with the increased spending trends was persistently high insurance coverage. Insured share of the population peaked in 2023 at 92.5%, but still remained “strong” in 2024 at 91.8%, Hartman said.
The high insured share stems from Affordable Care Marketplace coverage due to enhanced premiums, as explained. Eligibility redetermination that began in late 2023 and 2024 led to a 7.9 million decline in Medicaid enrollment between the two years, with private health insurance rising by 4.9 million but uninsured numbers growing by 2.8 million.
Between payer types, annual healthcare expenditure grew in 2024 by 7.8% for Medicare ($1.1 trillion in total), 6.6% for Medicaid ($931.7 billion in total), 8.8% for private health insurance ($1.6 trillion in total) and 5.9% for out-of-pocket spending ($556.6 million in total). The Medicaid tally included a 19.2% jump in state and local spending, from $281.1 million to $335 million, while federal spending stayed relatively even at $596.7 million.
On a per-enrollee basis, Medicare spending grew 5.4%, private health insurance rose 5.2% and Medicaid spiked 16.6% as redetermination filtered out low-severity enrollees.
The authors concluded their report with a note that future healthcare spending could, along with utilization and insurance trends, be impacted by a slew of factors, including demographic changes, new technologies like AI and novel cancer treatment, and shifting policies around weight loss treatments or wellness. The current report did not attempt to quantify such changes, as the agency typically releases its forward-looking healthcare spending projection report during the summer.