News: CMS reports U.S. healthcare spending up 7.5%, nearing five trillion dollars

The nation's healthcare expenditures hit $4.9 trillion in 2023, increasing by 7.5%, according to a recent study published in Health Affairs by CMS’ National Health Expenditure Accounts Team. This number is up sharply from the previous two years, rising to $14,570 per person, HealthLeaders reported.

The analysis showed that the growth was notably higher than the 4.6% rate of growth in 2022 and 4.6% in 2021, though still below the 10.6% growth in 2020 during the height of COVID-19. CMS attributed this year’s acceleration in growth to "non-price factors," indicating a higher use and intensity of healthcare services made available in commercial insurance and Medicaid, with 92.5% of the United States population covered.

By source of funds, the spending was broken down as follows:

• Private health insurance (30% share): Spending for private health insurance reached $1.5 trillion in 2023 and increased 11.5%. The growth in 2023 was driven by increased enrollment in marketplace and employer-sponsored private health insurance plans, strong growth in spending for goods and services, and strong growth in the net cost of insurance. In 2023, enrollment in private health insurance increased 1.6%, or by 3.3 million individuals. 

• Medicare (21% share): Medicare spending reached $1 trillion in 2023, increasing 8.1% following 6.4% growth in 2022. This faster growth was driven by a turnaround in traditional fee-for-service spending growth (from a decline of 1.4% in 2022 to an increase of 1.7% in 2023). Medicare Advantage private plan spending continued to experience rapid growth (increasing 14.7% in 2023 following 15.7% growth in 2022) and accounted for 52% of total Medicare expenditures in 2023 (from a 39% share in 2019). Total Medicare enrollment grew 2.1% in 2023, a slight acceleration from 2022 when enrollment increased 1.9%. 

• Medicaid (18% share): Medicaid spending increased 7.9% to $871.7 billion in 2023, a slower growth rate than in 2022 (9.7%) and 2021 (9.5%). In 2023, Medicaid enrollment increased 0.8%, following growth of 7.5% in 2022, and reached 91.7 million, even as states resumed the re-determination of Medicaid eligibility (also referred to as “unwinding”) following the end of pandemic-era coverage protections. 

• Out-of-pocket (10% share): Total out-of-pocket spending increased by 7.2% in 2023 to $505.7 billion, a slight acceleration from growth of 6.9% in 2022. Hospital care, physician and clinical services, and nursing care facilities and continuing care retirement communities, which collectively accounted for 33% of all out-of-pocket spending in 2023, were the main contributors to the faster growth in 2023. 

Editor’s note: To read HealthLeaders’ coverage of this story, click here. To access the CMS analysis, click here.