Home » US Health Spending Grows 7.5% in 2023 to Reach $4.9 Trillion

US Health Spending Grows 7.5% in 2023 to Reach $4.9 Trillion

by Richard A Reagan

Health spending in the United States rose by 7.5% in 2023 to $4.9 trillion, according to the Centers for Medicare & Medicaid Services. 

This increase, up from 4.6% in 2022, was driven by higher spending on private health insurance, which grew 11.5%, and Medicare, which increased 8.1%.

Medicare Advantage plans continued to play a significant role, accounting for 52% of total Medicare expenditures in 2023, up from 39% in 2019. Traditional fee-for-service Medicare, which had seen a decline in spending in 2022, grew by 1.7% in 2023. 

Medicaid spending also rose, albeit at a slower rate, with growth at 7.9% compared to 9.7% in the previous year.

Hospital care had the most notable increase in spending among healthcare services. 

Expenditures for hospital care grew by 10.4% in 2023, a sharp contrast to the 3.2% growth recorded in 2022. Spending on physician and clinical services increased by 7.4%, driven by greater utilization and intensity of services rather than price changes. Prices in this category grew by only 0.6%, nearly unchanged from the 0.5% growth rate in 2022.

Prescription drug spending grew substantially, increasing by 11.4% in 2023 after a 7.8% rise in 2022. The use of antidiabetic medications played a significant role in this growth, along with shifts in the types of prescriptions filled, including changes in the balance between brand-name and generic drugs.

The share of health spending as a portion of the gross domestic product stood at 17.6% in 2023. This was a return to levels seen in 2019, following the temporary rise to 19.5% in 2020 due to federal COVID-19 relief funding. Over the past three years, both health spending and the economy have grown at similar rates.

The proportion of Americans with health insurance reached a record high of 92.5% in 2023. 

This increase was largely attributed to higher enrollment in Affordable Care Act marketplace plans and employer-sponsored health insurance. Medicaid enrollment also remained elevated, with 91.7 million beneficiaries reported.

Experts at CMS pointed to several contributing factors behind the spending growth, including a rise in the use of healthcare services and an increase in out-of-pocket expenditures. 

A severe flu season in 2023 also played a role in the higher demand for medical care. The report provides critical insights into trends affecting healthcare spending and the broader economic implications for the nation.

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