U.S. healthcare spending grew faster than the economy overall last year and is expected to continue doing so through 2032 as it climbs to nearly one-fifth of gross domestic product, according to a report released Wednesday by actuaries at the Centers for Medicare and Medicaid Services and published in the journal Health Affairs.
Medicare’s actuaries project that U.S. health spending from 2023 through 2032 will grow 5.6% a year on average, outpacing expected nominal economic growth of 4.3% a year. As a result, healthcare spending is projected to swell from 17.3% of gross domestic product in 2022 to 19.7% in 2032.
For 2023, healthcare spending increased at a rapid 7.5% annual pace, even as the Covid pandemic subsided. That growth was faster than the 6.1% expansion of the economy overall, driving health outlays to a total of $4.8 trillion.
Insurance coverage hit a historic high: The increase reflects broad gains in insurance coverage, which is expected to have reached 93.1% in large part as the result of high pandemic-era Medicaid enrollment that is now being unwound. After reaching a record 91.2 million in 2023, Medicaid enrollment is projected to drop this year by 10.2 million (11.2%), according to the report, as states redetermine the eligibility of enrollees after the expiration of a pandemic-era prohibition against disenrollments. Overall, coverage is expected to dip — but not plummet — with enrollment gains projected for direct-purchase plans (including those through the Affordable Care Act marketplace). The share of the population with health insurance is expected to remain above 90% through 2032.
Medicare projected to have highest spending growth: Medicare spending rose by 8.4% in 2023, topping $1 trillion. It is projected to climb 6.1% in 2024. Medicaid spending, meanwhile, grew by 5.7%, compared with a 9.6% increase for 2022. And private health insurance spending is projected to have risen 11.1% last year, up from 5.9% the year before. Out-of-pocket spending rose 7.9%.
“Among the major payers, Medicare has the highest projected ten-year average spending growth rate, at 7.4 percent, whereas the growth rates for private health insurance (5.6 percent), Medicaid (5.2 percent), and out-of-pocket (4.7 percent) expenditures are projected to be comparatively lower,” the report says. “Medicare’s higher average spending growth in 2023–32 is mainly due to the program’s average projected enrollment growth rate of 2.0 percent, which reflects the enrollment of the baby-boom generation through 2029; in comparison, average projected enrollment growth is lower for private health insurance, at 0.3 percent, and it declines by 0.6 percent for Medicaid, an outcome associated with the end of the public health emergency.”
Hospital spending soars: Hospital spending is projected to have increased 10.1% last year, up from a 2.2% rise in 2022, with the change coming “in part because of increasing utilization,” according to the government actuaries. Hospital spending growth is expected to average 5.6 percent a year from 2027 to 2032.
