Health spending rose to $4.9T, CMS actuaries report

Modern Healthcare – Wednesday, December 18, 2024
By Bridget Early

The U.S. spent $4.9 trillion on healthcare in 2023, a 7.5% increase from the prior year, according to a report the Centers for Medicare and Medicaid Services Office of the Actuary published in the journal Health Affairs on Wednesday.

National health expenditures, including the public and private sectors, constituted 17.6% of gross domestic product last year. That’s slightly higher than 17.4% in 2022 and 17.5% in 2019 — prior to the COVID-19 pandemic — but lower than 19.5% in 2020 and 18.3% in 2021 amid the public health crisis.

The Office of the Actuary, which is independent from CMS leadership, mainly attributes the growth in 2023 to greater utilization and intensity. Hospital care, physician and clinical services, and retail prescription drugs were the three biggest categories of higher spending.

Expenditures increased at a greater rate last year than during the prior two years, when pandemic-era funding flexibilities began to expire, according to the actuaries. Healthcare expenditures rose 4.6% in 2022 and 4.2% in 2021 after spiking 10.4% in 2020 because of COVID-19.

“As the public health emergency ended and little COVID-19 federal funding remained, the acceleration in spending growth largely reflected increased use of healthcare goods and services, which influenced the strong growth in both private health insurance and Medicare spending,” the report says.

Healthcare prices grew 3% in 2023, below the overall 3.6% inflation rate, according to the Office of the Actuary. The gap was wider in 2022, when inflation hit 7.1% — the highest since 1981 — while healthcare prices increased 3.1%.

The uninsured rate dipped from 8% to 7.5% last year, largely driven by private health insurance, which covered 207.3 million people. Enhanced subsidies for health insurance exchange plans, due to expire at the end of 2025, contributed to 5.8 million more enrollees signing up, the actuaries reported.

Medicaid enrollment remained high at 91.7 million in 2023, but growth slowed as states trimmed the rolls through the redeterminations process to unwind continuous coverage requirements linked to enhanced federal funding during the pandemic. This also led to state and local governments bearing a larger share of national health expenditures last year. Medicaid spending went up 7.9% in 2023 compared with 9.7% the year before.

Medicare enrollment rose 2.1% to 65.1 million and spending increased 8.1% in 2023, after rising 6.4% in 2022, as expenditures accelerated in both fee-for-service Medicare and Medicare Advantage.

In a separate report published in June, the Office of the Actuary projected national health expenditures would reach $7.7 trillion and comprise nearly one-fifth of the economy by 2032.

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