National health spending for 2023 is projected to have grown at a rate of 7.5 percent, with expenditures reaching $4.8 trillion, according to a study from the Office of the Actuary (OACT) at the Centers for Medicare and Medicaid Services (CMS). Health spending over the course of 2023–32 is expected to grow 5.6 percent per year on average, leading to a projected $7.7 trillion in overall spending by 2032.
National health spending is expected to have outpaced nominal economic growth in 2023, causing a slight increase in the projected health spending share of gross domestic product (GDP) from 17.3 percent in 2022 to 17.6 percent in 2023. Over the course of the 2023–32 period, national health expenditures are expected to grow 5.6 percent per year on average—outpacing the nominal GDP growth rate of 4.3 percent—resulting in health spending accounting for 19.7 percent of GDP by 2032.
“The earlier years of the projection period are expected to reflect divergent trends in spending and enrollment patterns as the health sector transitions away from pandemic-related policy effects,” said Jacqueline A. Fiore, an economist in the OACT at CMS and lead author of a study published in Health Affairs.
In 2023, the insured share of the population is projected to have reached a historic high of 93.1 percent, driven by gains in enrollment in both Medicaid and Marketplace plans. However, Medicaid enrollment is expected to fall from its peak of 91.2 million in 2023 to 79.4 million by 2025, because of the expiration of the continuous enrollment requirement in the Families First Coronavirus Response Act of 2020. The insured share of the population is expected to remain above 90 percent through 2032.
Medicare spending is projected to have grown 8.4 percent in 2023 compared with 5.9 percent in 2022, with expenditures exceeding $1.0 trillion. Rates of spending growth for private health insurance and out-of-pockets also are estimated to have accelerated in 2023 (going from 5.9 percent in 2022 to 11.1 percent and from 6.6 percent in 2022 to 7.9 percent, respectively). Medicaid spending growth is estimated to have slowed in 2023 to 5.7 percent, down from 9.6 percent in 2022.
The Inflation Reduction Act of 2022 (IRA) is expected to affect spending trends for the Medicare program and its beneficiaries, based on provisions that allow for negotiated prices on certain drugs covered under Parts B and D, as well as changes to the cost-sharing requirements. Coinciding with a temporary special enrollment period, the IRA is also projected to influence enrollment trends in private health insurance as a result of the law’s temporary extension of enhanced Marketplace subsidies.
Among the major payers, Medicare spending is expected to grow the fastest over the course of 2023–32 (7.4 percent on average), mainly because of the program’s projected enrollment growth rate of 2.0 percent, reflecting the enrollment of the baby boomer generation through 2029. During the same period, private health insurance spending is projected to grow 5.6 percent on average, Medicaid spending 5.2 percent, and out-of-pocket spending 4.7 percent.
Hospital spending is expected to have grown 10.1 percent in 2023, which is substantially higher than 2022’s 2.2 percent. Over the course of the next decade, hospital spending growth is expected to average 5.7 percent per year.
Physician and clinical services spending growth is projected to have reached a projection-period peak of 8.4 percent in 2023 (compared with 2.7 percent in 2022) and to average 5.6 percent growth over 2023–32. Unlike spending growth for hospital, physician and clinical services, the growth rate for retail prescription drugs is expected to be lower in 2023, at 7.0 percent, down from 2022’s 8.4 percent. For 2023–32, annual growth of 6.0 percent is projected for retail prescription drugs.
Non-government sponsors of healthcare (businesses, households, and other private revenues) are expected to account for a similar proportion of total health spending in 2032 as they did in 2022 (51 percent and 52 percent, respectively). Total government’s spending share (including federal, state, and local) is projected to decrease to 46 percent in 2024 (down from 48 percent in both 2023 and 2022) before increasing to 49 percent by 2032.
