U.S. health care spending hits $4.9 trillion in 2023

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Americans spent $4.9 trillion on health care in 2023, equal to $14,570 for every man, woman and child in the nation.

As a percentage of the economy, health care was closer to the level of 2019, dipping from the high of the COVID-19 pandemic. Meanwhile, more patients using antidiabetes and antiobesity medications caused a noticeable bump in prescription drug spending.

The 2023 figures were compiled by the Office of the Actuary of the U.S. Centers for Medicare & Medicaid Services (CMS). Health Affairs published the study, “National Health Expenditures In 2023: Faster Growth As Insurance Coverage And Utilization Increased,” online Dec. 18, 2024, ahead of its January print issue.

Total spending increased by 7.5% in 2023, faster than the growth rate of 4.6% in 2022, largely due to increased use and intensity of services, said Anne Martin, the CMS economist who presented the numbers in a news media webinar on Dec. 18.

The measure of national health care spending has been distorted since 2020, when the federal government began bolstering the economy with various COVID-19 pandemic relief programs and spending. Overall health spending increased by 10.4% in 2020, but the growth rates slowed to 4.2% in 2021 and 4.6% in 2022. When the COVID-19 public health emergency ended in May 2023, growth generally returned to pre-pandemic levels.

The 2023 percentage of 17.6% of the economy was closer to the 17.5% in 2019, compared with 2020, when the pandemic pushed health care spending to grow to 19.5% of the American economy.

Last year, an estimated 92.5% of all Americans had some form of health insurance coverage.

Private health insurance was about 30% of the total, with spending on private insurance hitting $1.5 trillion, increasing 11.5%.

“The robust growth in 2023 was driven by increased enrollment in Marketplace and employer-sponsored private health insurance plans, strong growth in spending for goods and services, and strong growth in the net cost of insurance. In 2023, enrollment in private health insurance increased 1.6%, or by 3.3 million individuals,” said a summary from CMS and Health Affairs. It referred to the Health Insurance Marketplaces created by the Affordable Care Act.

Medicare

Medicare spending reached $1 trillion in 2023, or 21% of health care spending, increasing 8.1% following 6.4% growth in 2022.

“This faster growth was driven by a turnaround in traditional fee-for-service spending growth (from a decline of 1.4% in 2022 to an increase of 1.7% in 2023),” the Health Affairs/CMS summary said. “Medicare Advantage private plan spending continued to experience rapid growth (increasing 14.7% in 2023 following 15.7% growth in 2022) and accounted for 52% of total Medicare expenditures in 2023 (from a 39% share in 2019). Total Medicare enrollment grew 2.1% in 2023, a slight acceleration from 2022 when enrollment increased 1.9%.”

Medicaid

Medicaid spending increased 7.9% to $871.7 billion in 2023, or 18% of health care spending, with a slower growth rate than in 2022 (9.7%) and 2021 (9.5%). In 2023, Medicaid enrollment increased 0.8%, following growth of 7.5% in 2022, and reached 91.7 million, even as states resumed the re-determination of Medicaid eligibility (also referred to as “unwinding”) following the end of pandemic-era coverage protections, the official summary said.

Out-of-Pocket

Total out-of-pocket spending increased by 7.2% in 2023 to $505.7 billion, a slight acceleration from growth of 6.9% in 2022, for a 10% share of health care spending. Hospital care, physician and clinical services, and nursing care facilities and continuing care retirement communities, which collectively accounted for 33% of all out-of-pocket spending in 2023, were the main contributors to the faster growth in 2023, according to the official summary.

Hospital care

Based on major types of service or product, spending for hospital care services increased 10.4% in 2023 to reach $1.5 trillion. This rate of growth was the fastest since 1990, when hospital spending increased 10.8%. Faster growth in 2023 was driven by non-price factors (which include the use and intensity of services), with an increased number of hospital discharges and increased Medicare outpatient hospital utilization.

Physician and clinical services

Spending for physician and clinical services increased 7.4% to $978 billion in 2023, which was faster than the growth rate of 4.6% in 2022. Faster growth in 2023 was driven by non-price factors (which includes use and intensity of services), while price growth remained low at 0.6%.

Prescription drugs

Antidiabetes drugs pushed up prescription drug spending, which increased 11.4% to $449.7 billion in 2023, accelerating from a rate of 7.8% in 2022.

“Additionally, the growth is due to factors associated with mix which includes how many prescriptions are dispensed, whether they are brand or generic, and the price,” Martin said. “In 2023 the number of prescriptions dispensed increased at a slightly slower rate than in 2022 but a larger proportion of dispense prescriptions were for brand name drugs. Also retail prescription drug prices overall increased at a faster rate, with brand name drugs increasing at a faster rate than generics.”

Additional contributors were Micah Hartman, Benjamin Washington, Aaron Catlin and the National Health Expenditure Accounts Team of CMS. Health Affairs Senior Editor Laura Tollen, MPH, hosted the presentation.