What's Happening?
The Centers for Medicare and Medicaid Services (CMS) reported a 7.2% increase in U.S. healthcare spending, reaching $5.3 trillion in 2024. This rise is attributed primarily to increased utilization and the
complexity of services rather than price hikes. The spending now accounts for 18% of the U.S. economy, up from 17.7% the previous year. The average healthcare expenditure per person rose to $15,474 in 2024 from $14,580. This marks the second consecutive year of significant spending growth, following a 7.4% increase in 2023. The report highlights a 9.9% rise in hospital care spending, an 8.1% increase in physician and clinical services, and a 7.9% rise in prescription drug spending. Despite a 2.5% overall price increase in healthcare, the main drivers of spending were non-price factors such as increased usage and service intensity.
Why It's Important?
The increase in healthcare spending reflects a post-pandemic rebound in demand, with significant implications for the U.S. economy and healthcare system. The sustained high level of insurance coverage, peaking at 92.5% in 2023 and remaining strong at 91.8% in 2024, underscores the impact of Affordable Care Marketplace coverage and enhanced premiums. However, the decline in Medicaid enrollment by 7.9 million and the rise in private health insurance by 4.9 million highlight shifts in insurance dynamics. The report suggests that future spending could be influenced by demographic changes, technological advancements, and policy shifts, potentially affecting the healthcare landscape and economic stakeholders.
What's Next?
Future healthcare spending trends may be shaped by various factors, including demographic shifts, new technologies like artificial intelligence, and policy changes regarding treatments and wellness. The CMS report indicates that these elements could impact utilization and insurance trends, although specific projections were not quantified in the current analysis. The agency typically releases forward-looking spending projections during the summer, which may provide further insights into the evolving healthcare landscape.
