Sponsors Of Health Care
In the US, health care is financed by households, private businesses, and governments. These entities are the ultimate sponsors of the nation’s health care bill and finance health spending such as out-of-pocket deductibles and copayments, private health insurance premiums, and government program expenditures (such as Medicare and Medicaid).
The federal government is the largest sponsor of health care expenditures ($1.7 trillion and a 31 percent share in 2024); its share includes the federal portion of Medicaid payments, federal Medicare payments, and federal government contributions to private health insurance as an employer, as well as other federal health insurance and programs (exhibit 4). Federal government–sponsored health care spending increased 5.5 percent in 2024, accelerating from growth of 3.8 percent in 2023. The increase in 2024 was driven by continued rapid growth in Marketplace tax credits and subsidies (34.9 percent in 2024, following 25.5 percent growth in 2023), as well as strong growth in federal Medicare expenditures financed by the federal government (9.6 percent in 2024, following 14.9 percent growth in 2023),10 which was associated with provisions in the Inflation Reduction Act (IRA) of 2022 that reduced beneficiary cost sharing and shifted more financial responsibility to the federal government (data not shown).11 Although still growing, federal Medicaid spending increased just 0.7 percent in 2024, after growth of 3.6 percent in 2023 (exhibit 5), as enrollment in the program dropped by 7.9 million people (calculated from exhibit 3) and the enhanced federal medical assistance percentage (FMAP) was phased out.12
Private Health Insurance
Private health insurance, the largest payer of health care (at $1.6 trillion and 31 percent of total national health care expenditures in 2024), increased 8.8 percent in 2024 after growth of 11.2 percent in 2023 (exhibit 5). Private health insurers’ nonmedical spending15 growth slowed from 10.5 percent in 2023 to 4.4 percent in 2024,13 as some health insurance plans reported higher medical losses resulting from an increase in demand for care that was stronger than anticipated.3,16
Both 2024 and 2023 were marked by strong growth in private health insurance spending for personal health care (9.4 percent in 2024 and 11.3 percent in 2023) as enrollment increased and demand for medical care picked up. Private health insurance spending growth for hospital care (10.4 percent), physician and clinical services (9.6 percent), and retail prescription drugs (7.4 percent) all remained strong in 2024 (data not shown).
More than 214 million people had private health insurance coverage in 2024 (exhibit 3), with 178.6 million covered under employer-sponsored insurance, 21.1 million covered by Marketplace plans, and 15.6 million covered by Medigap and other direct forms of coverage.4,17 Marketplace enrollment increased from 13.5 million in 2022 and 16.2 million in 2023, as enhanced premium tax credits lowered the cost for enrollees.5 In addition, the Medicaid continuous enrollment provision expired, and some who lost Medicaid coverage enrolled in Marketplace plans.6 In total, Marketplace spending was $149.5 billion in 2024, and the federal government financed 78 percent of this amount, or $116.6 billion.13 With the recent growth in Marketplace tax credits, subsidies, and enrollment, the federal government’s share of total private health insurance spending was 10.7 percent in 2024, up from an 8.1 percent share in 2019.13
Medicare
Medicare spending, which accounted for 21 percent of total national health care expenditures, reached $1.1 trillion in 2024, an increase of 7.8 percent after 9.0 percent growth in 2023 (exhibit 5). Although Medicare Advantage private plan spending slowed in 2024 (from 16.1 percent in 2023 to 9.0 percent in 2024) because of policy changes lowering benchmark payment rates, Medicare fee-for-service spending experienced faster growth in 2024, increasing 6.4 percent after growth of 2.0 percent in 2023 (data not shown).
Total Medicare enrollment grew 2.2 percent to 66.6 million in 2024, increasing at the same rate of growth as in 2023 (exhibit 3). Although experiencing faster spending growth in 2024, fee-for-service enrollment continued to decline (for the sixth year in a row), falling 1.4 percent. Medicare Advantage enrollment, in contrast, increased 6.1 percent in 2024 (compared with growth of 7.9 percent in 2023) to reach 33.4 million beneficiaries, or 50 percent of all Medicare enrollees (data not shown). Per enrollee, total Medicare spending grew 5.4 percent in 2024, a slower rate of growth than the increase of 6.7 percent in 2023 (exhibit 3), as a result of slower growth in Medicare Advantage spending.
Overall Medicare spending on goods and services experienced slightly slower growth in 2024, increasing 8.6 percent after growth of 9.4 percent in 2023.13 Although much of the slowdown in total Medicare expenditure growth among services was due to payment rate changes associated with Medicare Advantage, fee-for-service spending among services generally accelerated, particularly for hospital care and physician and clinical services. Fee-for-service Medicare hospital spending increased 4.1 percent in 2024 (compared with 1.3 percent in 2023), as both inpatient and outpatient volume and intensity of services increased faster in 2024.18 Fee-for-service spending for physician and clinical services, which includes Part B physician-administered drugs, increased 5.7 percent in 2024 (compared with 3.8 percent growth in 2023), partially as a result of a large increase in spending for skin substitutes, which are used for wound care, that was driven by increased utilization and higher prices (data not shown).18
Medicare spending for retail prescription drugs, which consists mainly of spending for Part D prescription drugs, increased 12.9 percent in 2024 after 11.9 percent growth in 2023 (data not shown). Part D benefit redesign provisions associated with the IRA contributed to elevated rates of growth for prescription drug spending in 2023 and 2024, as benefit expansion increased Medicare’s financial responsibility.11 In addition, rapid increases in the demand for brand-name antidiabetic drugs in both years continued to affect Medicare drug spending growth.19
Medicaid
In 2024, Medicaid spending reached $931.7 billion, accounting for 18 percent of total national health care expenditures (exhibit 5). Although total Medicaid spending increased by 6.6 percent in 2024, this growth rate was slower than in previous years—down from 7.9 percent in 2023 and 9.7 percent in 2022. Medicaid enrollment declined by 8.6 percent (or 7.9 million) to 84.3 million in 2024 (exhibit 3). This decline occurred as states resumed eligibility redeterminations after the end of pandemic-era coverage provisions.
Coinciding with declining Medicaid enrollment, per enrollee Medicaid spending surged by 16.6 percent in 2024, which was a dramatic increase compared with the 6.5 percent rise in 2023. This acceleration was due to two primary factors. First, 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. Second, rising provider payment rates,20 along with growth in state-directed payments to providers through managed care organizations, contributed to higher per enrollee spending. It is also notable that Medicaid government administration costs increased by 19.8 percent in 2024 compared with 9.2 percent in 2023, most likely because of continued unwinding operations.13
In 2024, mainly as a result of declining enrollment, all Medicaid services except home health care and nursing and residential care facilities experienced growth that was slower than growth in 2023. This includes the two largest service categories in Medicaid spending: hospital care (34 percent share), whose spending increased 8.5 percent after 9.2 percent growth in 2023, and other health, residential, and personal care (21 percent share), whose spending increased 8.9 percent after 9.7 percent growth in 2023. Services used for long-term care (the population most likely to use this type of care was more likely to retain Medicaid coverage)—including other health, residential, and personal care services; home health care; and nursing and continuing care retirement communities—continued to experience strong growth in 2023 and 2024 (8.9 percent and 9.5 percent, respectively; data not shown).
After growth of 3.6 percent in 2023, federal Medicaid spending increased by only 0.7 percent in 2024 because of the phasing out of the temporarily enhanced FMAP that was in place during the COVID-19 public health emergency12 (exhibit 5). This change shifted some costs back to the states, contributing to an increase in state and local Medicaid spending of 19.2 percent in 2024 and 18.2 percent in 2023. As a result, the federal government’s share of Medicaid spending fell to 64 percent in 2024, similar to the 63 percent share in 2019 before the public health emergency and down from 68 percent in 2023 and the peak of 71 percent in 2022 (calculated from exhibit 5).
Hospital Care
Spending for hospital care (31 percent of total health spending) was $1.6 trillion in 2024 and increased 8.9 percent, for a second year of strong growth after 10.6 percent growth in 2023 (exhibit 2). The substantial growth in both 2023 and 2024 resulted from a rebound in nonprice factors, such as the use and intensity of services, that were somewhat depressed during the public health emergency. In 2024, demand for hospital care showed signs of continued strength, as hospital days increased 1.5 percent and hospital discharges increased 3.2 percent.21 The strong growth in 2024 was observed for the key payers of hospital care services: private health insurance (10.4 percent), Medicare (6.9 percent), and Medicaid (8.5 percent).13 Hospital spending also includes sources of revenues not associated directly with the provision of care, and in 2024, growth in other private revenues was strong in part because of investment returns.22 Growth in prices for hospital care also contributed to the 2024 trend, increasing by 3.4 percent—the highest rate of increase since 2007 and faster than the 2.7 percent growth experienced in 2023.23
Physician And Clinical Services
Spending for physician and clinical services amounted to $1.1 trillion in 2024, representing 21 percent of total health care spending, and increased 8.1 percent, compared with 7.4 percent growth in 2023 (exhibit 2). These rates continue to reflect strong growth in nonprice factors, particularly the use and intensity of services. In addition, prices for physician and clinical services rose by 1.8 percent in 2024, compared with a 0.6 percent increase in 2023.24
Spending growth for physician and clinical services remained strong for private health insurance but slowed for both Medicare and Medicaid. Private health insurance spending for these services grew by 9.6 percent in 2024 and 9.3 percent in 2023, in part because of strong utilization.3 Medicare expenditures for physician and clinical services grew by 7.9 percent in 2024, after growth of 10.0 percent in 2023. This slower growth rate was due to the impact of lower Medicare Advantage benchmark payments, whereas fee-for-service Medicare spending grew faster—largely because of trends in physician-administered drugs, particularly for skin substitutes.18 For Medicaid, a decline in enrollment led to slower spending growth for physician and clinical services of 4.2 percent in 2024 compared with 5.5 percent in 2023.
Retail Prescription Drugs
Retail prescription drug spending increased 7.9 percent to $467.0 billion in 2024 and represented 9 percent of total health care spending (exhibit 2). Although demand for drugs to treat diabetes and weight loss continued to increase,25 overall retail prescription drug spending grew more slowly than in 2023, when it was 10.8 percent, in part because of slower growth in retail prescription drug prices (which increased 1.4 percent in 2024, compared with 2.3 percent in 2023),26 as well as slower growth in the use of medicines, as the number of prescriptions dispensed (based on a thirty-day supply) increased 2.5 percent in 2024 after growth of 2.9 percent in 2023.25 In addition, the number of new active substances launched decreased from sixty-five in 2023 to forty-eight in 2024—the lowest number of new active substances since 2019.25 Similar to the overall experience, retail prescription drug spending paid by private health insurance continued to experience strong growth of 7.4 percent in 2024, although this was down from 13.4 percent in 2023—the fastest rate of growth since 2002.13
Robust Medicare (primarily Part D) retail prescription drug spending growth continued in 2024, increasing 12.9 percent after 11.9 percent growth in 2023 (data not shown). Growth in spending on Medicare Part D benefits corresponds to provisions of the IRA that increased Medicare’s financial responsibility while easing beneficiaries’ burden. The IRA included provisions that reduced cost sharing for insulins and vaccines in 2023 and eliminated beneficiaries’ 5 percent coinsurance in the catastrophic coverage phase of the benefit and expanded eligibility for Part D low-income subsidies in 2024.27 Mainly because of these factors, out-of-pocket retail prescription drug spending (a 12 percent share) declined 0.9 percent in 2024 (after 2.2 percent growth in 2023) (data not shown).
Conclusion
Health care spending continued to account for an increasing share of GDP, at 18.0 percent in 2024, up from 17.7 percent in 2023, as health spending continued to outpace growth in GDP. Strong overall health care spending in 2023 and 2024 was due to growth in personal health care spending, which averaged 8.9 percent and represented the highest rate of growth for two consecutive years in more than three decades. The strong growth in personal health care over the course of these two years was driven primarily by nonprice factors such as the use and intensity of services, particularly for hospital care, physician and clinical services, and retail prescription drugs.
The insured share of the population reached a peak in 2023, at 92.5 percent, declining to 91.8 percent in 2024. A decline in Medicaid enrollment in 2024 was accompanied by enrollment gains in Marketplace plans and employer-sponsored private health insurance. Federal spending for health care picked up in 2024 as spending growth for Marketplace subsidies increased, as did Medicare spending related to provisions in the IRA.
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