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National Healthcare Spending

Projections for health spending in 2030 are currently 20% below what the CMS had anticipated a decade ago.

CMS projections of national health expenditures, in US $ trillions

The variance in these projections can be attributed, in part, to a deceleration in the growth of health expenditure towards the end of the 2010s. It is also probable that the provisions established by the IRA, enabling Medicare to negotiate prices for specific highcost drugs and tethering drug price increments to the Consumer Price Index (CPI), have played a role in this divergence.
CMS actuaries’ estimates of total health expenditures from 2010 and 2015 projections extended out through 2031 indicate that health spending is now expected to be $1.9 trillion less than what CMS had expected in 2010 projections and $800 billion less than 2015 projections

The share of the GDP devoted to health care reached 19.7% in 2020, an uptick from prior years as health spending increased and GDP decreased.

Health spending accounts for nearly one-fifth of the U.S. economy

Total National Health Expenditures as Percent of Gross Domestic Product, 1970-2021

From 1970 through 1980, the average annual per capita growth in the U.S. economy was 9.3% per year, compared to per capita health spending growth of 12.0%. Although health spending growth rate has since moderated, it generally continues to outpace growth of the economy

Health spending growth slowed in recent decades but consistently exceeded GDP growth until 2021

Average annual growth rate of GDP per capita and total national health spending per capita, 1970-2021

Source: National Health Expenditure Data, CMS

Spending on public health fell from 2020 to 2021, with the sharp increase in 2020 driven by the federal response to the COVID-19 pandemic. Federal public health spending decreased 42%, from $135.8 billion to $78.8 billion from 2020 to 2021. Meanwhile, state and local public health spending grew 6.1%, in line with previous years

Federal spending on public health decreased in 2021 from 2020 but remains above pre-pandemic levels

Local and federal expenditures on public health, US $Billions, 1971-2021

Source: National Health Expenditure Data, CMS

Total National Health Expenditures as Percent of Gross Domestic Product, 1970-2021

On a per capita basis, health spending has increased in the last five decades, from $353 per person in 1970 to $12,914 in 2021. In constant 2021 dollars, the increase was from $1,951 in 1970 to $12,914 in 2021.

On a per capita basis, real health spending decreased slightly in 2021

Total national health expenditures, US $ per capita, 1970-2021

Hospital spending represented close to a third (31.1%) of overall health spending in 2021, and physicians/clinics represented 20.3% of total spending. Prescription drugs accounted for 8.9% of total health spending in 2021.

Hospital and physician services represent half of total health spending

Relative contributions to total national health expenditures, by service type, 2021

From 2020 to 2021, retail prescription drugs experienced the fastest growth in spending at 7.8%, following 3.3% annual average growth from 2010 to 2020. Hospitals and physicians/clinics average spending growth between 2020 and 2021 was 4.4% and 5.6%, respectively.

In the last decade, spending growth on hospitals has slowed

Average annual expenditures growth rate select service types, 1970-2021

Source: National Health Expenditure Data, CMS

Private insurance expenditures now represent 28.5% of total health spending (up from 20.4% in 1970), and public insurance (Medicare, Medicaid, CHIP, VA), represented 42.5% of overall health spending in 2021 (up from 22% in 1970).

Health insurance is a growing share of total health expenditures and out-of-pocket spending is a smaller portion than in 1970

Total national health expenditures, by source of funds, 1970 and 2021

Source: National Health Expenditure Data, CMS

Per enrollee spending by private insurance grew by 54.1% from 2008 to 2021 — much faster than both Medicare and Medicaid spending growth per enrollee (36.9% and 18.9%, respectively).

On a per enrollee basis, private insurance spending has typically grown much faster than Medicare and Medicaid spending

Cumulative growth in per enrolled person spending by private insurance, Medicare, and Medicaid, 2008-2021

Source: National Health Expenditure Data, CMS

Health spending is estimated to have grown more slowly than the economy in 2022 and is estimated to have returned to pre-pandemic levels (17.4% of GDP). However, health spending growth is expected to outpace growth in the overall economy starting in 2023 and eventually hit 19.6% of GDP by 2031.

By 2031, it is projected that health spending will continue to represent almost one-fifth of the U.S. economy.

Health spending as a percent of Gross Domestic Product (GDP), 2015 - 2021; projected 2022 - 2031

Source: National Health Expenditure Data, CMS

Anticipated to average an annual rate of 4.8% from 2022 to 2031, this growth slightly surpasses the pre-pandemic rates, which averaged 3.9% from 2014 to 2019

Healthcare spending experienced a significant slowdown in 2021 but is anticipated to bounce back in the years to come.

Annual change in per capita health spending, 1970s – 2021; projected 2022 – 2031

Source: National Health Expenditure Data, CMS

In 2022, slower Medicaid enrollment is expected to have slowed growth to 4.7% per capita. Growth in drug spending is projected to slow to 2.8% per capita in 2023, as Medicaid enrollment declines.

Prescription drug spending witnessed a notable increase in growth in 2021 but is projected to decline to lower rates in the foreseeable future.

Annual change in per capita prescription drug spending, 1970s - 2021; projected 2022 - 2031

Source: National Health Expenditure Data, CMS

Growth in per enrollee Medicare spending is estimated to have slowed in 2022 to 3.1%, but is expected to rebound in 2023, partly driven by return in hospital use after a decrease in 2022.

Per enrollee spending across all payers is anticipated to experience a short-term acceleration.

Annual change in per enrollee health spending, by payer, 2015-2021; projected 2022-2031

Source: National Health Expenditure Data, CMS

In 2023, aggregate hospital spending is expected to increase by 9.3% due to a rebound in utilization and higher prices due to rising labor costs. Starting in 2025, hospital spending is expected to grow at average annual rate of 6.0% as hospitals transition away from pandemic-related use and spending.

The growth in prescription drug spending is anticipated to decrease, falling below that of hospital and physician services.

Annual change in total spending on hospitals, physicians and clinics, and retail prescription drugs, 2015 – 2021;
projected 2022 – 2031

Source: National Health Expenditure Data, CMS

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National Healthcare Spending

Projections for health spending in 2030 are currently 20% below what the CMS had anticipated a decade ago.

CMS projections of national health expenditures, in US $ trillions

The share of the GDP devoted to health care reached 19.7% in 2020, an uptick from prior years as health spending increased and GDP decreased.

Health spending accounts for nearly one-fifth of the U.S. economy

Total National Health Expenditures as Percent of Gross Domestic Product, 1970-2021

From 1970 through 1980, the average annual per capita growth in the U.S. economy was 9.3% per year, compared to per capita health spending growth of 12.0%. Although health spending growth rate has since moderated, it generally continues to outpace growth of the economy

Health spending growth slowed in recent decades but consistently exceeded GDP growth until 2021

Average annual growth rate of GDP per capita and total national health spending per capita, 1970-2021

Federal spending on public health decreased in 2021 from 2020 but remains above pre-pandemic levels

Local and federal expenditures on public health, US $Billions, 1971-2021

Total National Health Expenditures as Percent of Gross Domestic Product, 1970-2021

On a per capita basis, health spending has increased in the last five decades, from $353 per person in 1970 to $12,914 in 2021. In constant 2021 dollars, the increase was from $1,951 in 1970 to $12,914 in 2021.

On a per capita basis, real health spending decreased slightly in 2021

Total national health expenditures, US $ per capita, 1970-2021

Hospital spending represented close to a third (31.1%) of overall health spending in 2021, and physicians/clinics represented 20.3% of total spending. Prescription drugs accounted for 8.9% of total health spending in 2021.

Hospital and physician services represent half of total health spending

Relative contributions to total national health expenditures, by service type, 2021

From 2020 to 2021, retail prescription drugs experienced the fastest growth in spending at 7.8%, following 3.3% annual average growth from 2010 to 2020. Hospitals and physicians/clinics average spending growth between 2020 and 2021 was 4.4% and 5.6%, respectively.

In the last decade, spending growth on hospitals has slowed

Average annual expenditures growth rate select service types, 1970-2021

Private insurance expenditures now represent 28.5% of total health spending (up from 20.4% in 1970), and public insurance (Medicare, Medicaid, CHIP, VA), represented 42.5% of overall health spending in 2021 (up from 22% in 1970).

Health insurance is a growing share of total health expenditures and out-of-pocket spending is a smaller portion than in 1970

Total national health expenditures, by source of funds, 1970 and 2021

Per enrollee spending by private insurance grew by 54.1% from 2008 to 2021 — much faster than both Medicare and Medicaid spending growth per enrollee (36.9% and 18.9%, respectively).

On a per enrollee basis, private insurance spending has typically grown much faster than Medicare and Medicaid spending

Cumulative growth in per enrolled person spending by private insurance, Medicare, and Medicaid, 2008-2021

Health spending is estimated to have grown more slowly than the economy in 2022 and is estimated to have returned to pre-pandemic levels (17.4% of GDP). However, health spending growth is expected to outpace growth in the overall economy starting in 2023 and eventually hit 19.6% of GDP by 2031.

By 2031, it is projected that health spending will continue to represent almost one-fifth of the U.S. economy.

Health spending as a percent of Gross Domestic Product (GDP), 2015 - 2021; projected 2022 - 2031

Anticipated to average an annual rate of 4.8% from 2022 to 2031, this growth slightly surpasses the pre-pandemic rates, which averaged 3.9% from 2014 to 2019

Healthcare spending experienced a significant slowdown in 2021 but is anticipated to bounce back in the years to come.

Annual change in per capita health spending, 1970s – 2021; projected 2022 – 2031

In 2022, slower Medicaid enrollment is expected to have slowed growth to 4.7% per capita. Growth in drug spending is projected to slow to 2.8% per capita in 2023, as Medicaid enrollment declines.

Prescription drug spending witnessed a notable increase in growth in 2021 but is projected to decline to lower rates in the foreseeable future.

Annual change in per capita prescription drug spending, 1970s - 2021; projected 2022 - 2031

Growth in per enrollee Medicare spending is estimated to have slowed in 2022 to 3.1%, but is expected to rebound in 2023, partly driven by return in hospital use after a decrease in 2022.

Per enrollee spending across all payers is anticipated to experience a short-term acceleration.

Annual change in per enrollee health spending, by payer, 2015-2021; projected 2022-2031

The growth in prescription drug spending is anticipated to decrease, falling below that of hospital and physician services.

Annual change in total spending on hospitals, physicians and clinics, and retail prescription drugs, 2015 – 2021; projected 2022 – 2031

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Annual change in total spending on hospitals, physicians and clinics, and retail prescription drugs, 2015 – 2021;
projected 2022 – 2031