U.S. healthcare spending jumps 7.5% to $4.9 trillion in 2023: CMS
BALTIMORE, UNITED STATES — U.S. healthcare spending surged by 7.5% in 2023, reaching $4.9 trillion, according to the latest National Health Expenditure report from the Centers for Medicare & Medicaid Services (CMS). This marks a significant rebound in healthcare utilization and insurance enrollment following disruptions caused by the COVID-19 pandemic.
Healthcare expenditures accounted for 17.6% of the nation’s in 2023, with private insurance and Medicare driving much of the growth.
Spending on private health insurance rose by 11.5% to $1.5 trillion, representing 30% of total healthcare costs, while Medicare spending increased by 8.1% to $1 trillion, or 21% of total expenditures.
Legislative changes boost insurance enrollment
A key factor behind the spending surge was increased insurance enrollment, driven by legislative measures such as enhanced premium subsidies for marketplace plans.
“The higher growth was due to a combination of factors, such as increased enrollment…mainly due to legislation enacted during the pandemic,” said Anne Martin, an economist with CMS’ Office of the Actuary.
Medicaid spending also grew by 7.9%, reaching $885 billion in 2023, though its growth rate slowed compared to previous years as pandemic-related public health emergency measures expired. Medicaid accounted for 18% of total healthcare expenditures last year.
Hospital costs see fastest growth since 1990
Hospital care costs rose sharply by 10.4% in 2023, reaching $1.5 trillion — the fastest growth rate since 1990 — after a modest increase of 3.2% in 2022. This spike was attributed to higher hospital discharges and increased use of outpatient services among Medicare beneficiaries.
Prescription drug spending accelerates
Spending on prescription drugs also climbed significantly, growing by 11.4% to $449.7 billion compared to a 7.8% increase in 2022. CMS actuaries pointed to rising demand for drugs treating obesity and diabetes as key contributors to this growth.
For example, Medicare Part D’s per-member-per-month spending on anti-obesity drugs rose by 35%, driving a 12.2% increase in Medicare prescription drug costs overall.
Post-pandemic healthcare utilization rebounds
The report highlighted a broad increase in healthcare service utilization as Americans resumed routine and intensive care delayed during the pandemic.
Spending on physician and clinical services grew by 7.4%, reaching $978 billion, with increases seen across private insurance, Medicare, and out-of-pocket costs for patients.
Managing costs amid rising demand
The findings underscore ongoing challenges in managing healthcare costs amid rising demand for services and pharmaceutical innovations post-pandemic.
As healthcare spending continues to outpace economic growth, policymakers face increasing pressure to address affordability and access challenges across the system.
