U.S. healthcare spending jumped 7.2% to $5.3 trillion in 2024, outpacing the growth of the broader economy, according to new data released by the Centers for Medicare & Medicaid Services. The 2024 increase roughly matched a 7.4% increase in 2023, and the two-year rise in spending was the highest since 1991 and 1992. For context: Gross domestic product rose by 5.3% in 2024 and 6.7% in 2023.
The healthcare spending total represented 18% of the economy, up from 17.7% the year before. The total also works out to an average of $15,474 per person, up from $14,580.
The 2024 increase in spending was driven by higher use of care and increased complexity of services provided, with such factors accounting for half of the annual rise. Price increases contributed roughly a third of the increase. “Prices are a factor. They’re part of the equation. But non-price factors are the driver,” Micah Hartman, a statistician for Medicare and Medicaid who is the lead author of the new report, told reporters Wednesday.
Spending on hospital care rose 8.9% to $1.6 trillion (31% of the annual total), while spending on physician and clinical services rose 8.1% to $1.1 trillion (21% of the total). Prescription drug spending increased 7.9% to $467 billion (9% of the total).
* Private health insurance, which accounted for $1.6 trillion in payments in 2024, or 31% of total national healthcare expenditures, increased 8.8% following growth of 11.2% in 2023.
* Medicare spending reached $1.1 trillion for the year, accounting for 21% of the annual total. Spending in the program rose 7.8% after climbing 9% in 2023. Total Medicare enrollment grew 2.2% to 66.6 million, and enrollment in Medicare Advantage plans grew 6.1% to 33.4 million beneficiaries. Total Medicare spending per enrollee grew 5.4%.
* Medicaid spending climbed to $931.7 billion, up 6.6% — a rate of increase that slowed from the prior couple of years as enrollment in the program shrank by 7.9 million, or 8.6%, to 84.3 million. The drop in enrollment came as states began eligibility checks that had been suspended during the Covid-19 pandemic. As a result, spending per enrollee soared 16.6% in 2024 because healthier, lower-cost children and adults were no longer enrolled in the program, leaving a higher share of beneficiaries with complex or more costly medical needs. Higher provider payments also played a role, as did administrative costs that surged in large part as a result of the lapsing of those Covid-era policies. In all, Medicaid spending represented 18% of the national total in 2024.
The new data comes as millions of Americans face a surge in out-of-pocket costs for healthcare coverage as premiums rise and enhanced subsidies for Affordable Care Act plans have expired. The higher costs could result in a drop in the number of insured Americans, but the insured share of the population stayed at a high 91.8% as of 2024, just below the 2023 peak of 92.5%, according to the report.
The bottom line: Healthcare spending continues to grow as a share of the economy and federal spending on healthcare picked up again in 2024. The new report concludes by acknowledging that the outlook for healthcare spending will depend on a range of factors. “The future of health care spending remains uncertain,” they write. “For example, developments in artificial intelligence and cancer treatment, as well as expanding policies and use around weight loss treatments and other healthy behavior initiatives, may affect the health care system in unexpected ways.”