In 2023, the United States spent $4.9 trillion on health care, a growth rate of 7.5% in 2022 or about $14,570 per person, according to a CMS report from the National Health Expenditure Accounts Team.
To put the 7.5% in context, consider that 7.5% is almost twice the growth rate in the Consumer Price Index, which rose by 4.1% from 2022 to 2023. Also the 7.5% rate outpaced health spending rates in 2021 (4.2%) and 2022 (4.6%), the accounts team reported in Health Affairs. Lower growth rates in 2021 and 2022 were due to temporary federal funding for the COVID-19 pandemic. When the public health emergency ended in 2023, spending growth accelerated largely due to increased use of health care goods and services, the team reported.
Another reason for higher spending in 2023, was more Americans (92.5%) had health insurance because enrollment in private health plans had strong growth for two straight years, the report shows. Enrollment in Affordable Care Act plans rose by 2.7 million individuals in 2023, mostly as a result of enhanced premium tax credit subsidies under the American Rescue Plan Act of 2021 and renewed under the Inflation Reduction Act of 2022, the accounts team explained.
On Jan. 8, CMS reported a record 23.6 million consumers selected ACA plans for coverage that starts Jan. 1, including 3.2 million new consumers and 11.6 million more enrollees compared with open enrollment for 2021 coverage.
Another factor driving up health care spending from 4.6% in 2022 to 7.5% in 2023 was what the team called non-price factors, such as increased use and intensity of services, the report showed.
For health care journalists, the report may be most useful because it shows health spending by type of service or product. For example, one type of “service or product” is out-of-pocket costs, which consumers pay at the point of care or later if they get a bill. Consumer spending for out-of-pocket costs represented 10% of all national health care spending and increased by 7.2% in 2023 to $505.7 billion, slightly more than the growth rate in out-of-pocket costs of 6.9% in 2022, the report showed.
In other words, Americans who used the health care system paid almost $506 billion (or 10% of all health care costs) of their own money after they paid for health insurance premiums and other costs associated with accessing health care. That $506 billion went to hospitals, physicians and other clinical services, nursing homes and continuing care communities, the report added.
Health expenditure highlights
Here is a breakdown of health spending by type of service or product. View this CMS document for a more detailed breakdown.
- Hospital care (31% share). As in most years, the largest share of spending went to hospitals, rising by 10.4% in 2023 to $1.5 trillion, the team reported. “This rate of growth was the fastest since 1990, when hospital spending increased 10.8%,” the accounts team explained. “The acceleration in 2023 was driven by strong growth in spending by all major payers, including private health insurance (from 8% in 2022 to 13% in 2023), Medicare (from 1.5% in 2022 to 6% in 2023), and other private revenue (from minus 9.2% in 2022 to 27.8% in 2023).” As with out-of-pocket spending, faster growth in hospital costs in 2023 was driven by non-price factors, such as more use and intensity of services, an increased number of hospital discharges and more use of outpatient hospital services for Medicare members, the report noted.
- Physician and clinical services (20% share), increasing by 7.4% to $978 billion in 2023, much faster than the growth rate of 4.6% in 2022, the report showed. Private health insurance spending for physician and clinical services grew 9.4% in 2023 (compared with growth of 8.5% in 2022), while out-of-pocket spending increased 7% (faster than its growth rate of 4.6% in 2022). Again, non-price factors drove increased spending, the report noted.
- Retail prescription drugs (9% share), rising 11.4% to $449.7 billion in 2023, 46% faster than the rate of 7.8% in 2022, the team noted. Private health insurers paid 13.8% more for prescription medications in 2023, almost three times faster than that rate or growth (3.5%) in 2022, and Medicare spending on drugs rose 12.2% in 2023 after 9% growth in 2022, the report showed.
As many journalists know, increased spending on drugs in 2023 was driven by retail prescription drug spending on medications for patients with diabetes and obesity, such as Ozempic, Wegovy and other glucagon-like peptide-1 agonists (called GLP-1s), the accounts team added.
The report also showed how much went to each category of spending for the following:
- Private health insurance (30%), rising to $1.5 trillion in 2023 an increase of 11.5%;
- Medicare (21%), which reached $1 trillion in 2023, increasing 8.1% following 6.4% growth in 2022;
- Medicaid (18%), rising to $871.7 billion in 2023 and increasing by 7.9%, a slower growth rate than in 2022 (9.7%), the report showed;
- Out-of-pocket (10%), Rose to $505.7 billion, an increase of 7.2%.
On Medicaid, the report noted that enrollment in the federal-state program for the poor and disabled reached 91.7 million Americans, even as states resumed the re-determination of Medicaid eligibility (also referred to as the “unwinding”) after the pandemic-era coverage protections ended.
