National health care spending hit $5.3T in 2024

WASHINGTON – Health care spending in the U.S. reached $5.3 trillion and increased 7.2% in 2024, similar to 7.4% in 2023, as increased demand for health care influenced this two-year trend, according to a new article in the journal Health Affairs. 

Health care spending growth continued to outpace overall economic growth 

As a result, the health care share of the economy increased from 17.7% in 2023 to 18% in 2024. In 2024, the share of gross domestic product (GDP) devoted to health care was 18%, which was higher than the 2022 and 2023 shares of 17.6% and 17.7%, respectively. For 2023 and 2024, average health care spending growth of 7.3% per year was nearly 3 percentage points faster than during 2021–22. In comparison, GDP growth slowed significantly from the period 2021–22, averaging 6% per year in 2023–24. 

Medicare FFS spending experienced faster growth 

Medicare spending, which accounted for 21% of total national health care expenditures, reached $1.1 trillion in 2024, an increase of 7.8% after 9% growth in 2023. Although Medicare Advantage private plan spending slowed in 2024 (from 16.1% in 2023 to 9% in 2024) because of policy changes lowering benchmark payment rates, Medicare fee-for-service spending experienced faster growth in 2024, increasing 6.4% after growth of 2% in 2023. 

Medicare Advantage enrollment hits 50% of all enrollees 

Total Medicare enrollment grew 2.2% to 66.6 million in 2024, increasing at the same rate of growth as in 2023. Although experiencing faster spending growth in 2024, fee-for-service enrollment continued to decline (for the sixth year in a row), falling 1.4%. Medicare Advantage enrollment, in contrast, increased 6.1% in 2024 (compared with growth of 7.9% in 2023) to reach 33.4 million beneficiaries, or 50% of all Medicare enrollees (data not shown). Per enrollee, total Medicare spending grew 5.4% in 2024, a slower rate of growth than the increase of 6.7% in 2023, as a result of slower growth in Medicare Advantage spending. 

Medicaid spending slowed as enrollment declined 

In 2024, Medicaid spending reached $931.7 billion, accounting for 18% of total national health care expenditures. Although total Medicaid spending increased by 6.6% in 2024, this growth rate was slower than in previous years – down from 7.9% in 2023 and 9.7% in 2022. Medicaid enrollment declined by 8.6% (or 7.9 million) to 84.3 million in 2024. This decline occurred as states resumed eligibility redeterminations after the end of pandemic-era coverage provisions. 

But per-enrollee Medicaid spending surged 

Coinciding with declining Medicaid enrollment, per enrollee Medicaid spending surged by 16.6 % in 2024, which was a dramatic increase compared with the 6.5% rise in 2023. This acceleration was due to two primary factors: 

• Changes in enrollment composition resulted in a higher proportion of enrollees with complex medical conditions, greater health care needs and higher utilization rates, as most people no longer enrolled in the program were lower-cost children and adults. 

• Rising provider payment rates, along with growth in state-directed payments to providers through managed care organizations, contributed to higher per enrollee spending. 

The article also noted that Medicaid government administration costs increased by 19.8% in 2024 compared with 9.2% in 2023, most likely because of continued unwinding operations. 

Read the full article here.