U.S. healthcare spending hits $5.3Tn in 2024, says CMS
NEW YORK, UNITED STATES — United States healthcare spending surged to $5.3 trillion in 2024, heightening financial and operational pressures on hospitals, health systems, and clinics as insurance enrollment expanded and patient use of medical services climbed nationwide, according to the Centers for Medicare & Medicaid Services.
In the report, healthcare spending rose 7.2%, or $5.3 trillion, in 2024 from $4.9 trillion in 2023, driven largely by higher enrollment in private insurance plans and increased utilization across care settings.
CMS said healthcare spending “accounted for 18% of U.S. gross domestic product in 2024,” up from 17.7% in 2023 and growing faster than the broader economy.
Providers see a paradox in the numbers: on one hand, there is increasing demand and coverage availability, while on the other, costs and administrative burdens are intensifying.
Rising Medicaid, Medicare admin costs strain providers
CMS said spending on government administration, including Medicaid and Medicare services, posted the biggest increase, rising 14.7% in 2024.
According to a Reuters report, changes in Medicaid coverage after COVID-era policies lapsed were a major contributor to higher administrative costs, with Medicaid government administration costs alone increasing by 19.8%.
On the side of hospitals and clinics, this churn has resulted in the piling up of billing tasks, carrying out more eligibility checks, and a greater risk of uncompensated care due to the emergence of coverage gaps.
To cope with the patient transition between Medicaid and Affordable Care Act (ACA) plans, the providers were obliged to invest in revenue cycle teams and cutting-edge technology to handle constant payer changes.
At the same time, spending on services delivered by non-medical or dental professionals and home healthcare rose 10.8% and 10.2%, respectively.
The increase is indicative of a general transition to outpatient and home care, which is forcing health organizations to reconsider their staffing models, collaborations, and management of patient care beyond the hospital.
Higher hospital prices and volumes push costs up
The CMS stated that the hospital prices were also one of the significant factors for the increased spending, which saw a hike of 3.4% in 2024, marking it as the highest rate since 2007.
Total spending on hospital care reached $1.6 trillion, rising 8.9%, though that marked a slowdown from 2023.
The increased prices and volumes thereby contribute to hospital revenues along with the increase in labor, capital, and supply costs. Many systems continue to face thin margins, particularly safety-net providers absorbing patients who lost Medicaid coverage.
Insurance growth offered some relief. ACA enrollment increased more than 30% to 21.1 million people, and overall private insurance enrollment rose 3.5% to 214.3 million.
According to CMS, the introduction of a 2024 special enrollment period for those who lost their Medicaid coverage to enroll in ACA plans has resulted in increased coverage.
For healthcare providers, the coverage expansion could lead to reduced bad debt, but the statistics indicate that, still, the control over cost growth and administrative complexity would be the major challenge in healthcare spending reaching new heights.
