Healthcare spending reached nearly $5 trillion in 2023, growing by 7.5% from the prior year, according to new data from the federal government.
The Centers for Medicare & Medicaid Services (CMS) Office of the Actuary released its annual National Health Expenditure report on Wednesday, in which it found that total health spending in 2023 was $4.9 trillion, accounting for 17.6% of the total U.S. economy.
The study found that spending in the private insurance sector as well as Medicare grew at a faster rate than in 2022, while spending and enrollment growth in Medicaid slowed with the end of the COVID-19 public health emergency.
Anne Martin, an economist with the National Health Statistics group at the Office of the Actuary, told reporters during a briefing that when COVID-19 relief funding is excluded, one of the key drivers in the increased spending is higher utilization.
Another major factor, she said, was an increase in insurance enrollment driven by legislative changes such as the enhanced premium subsidies for marketplace plans.
"The higher growth was due to a combination of factors, such as increased enrollment, and that was mainly due to legislation enacted during the pandemic, leading to increased enrollment in marketplace and Medicaid," Martin said. "There was also increased use and intensity of services, which was kind of across the board, which includes post-pandemic rebounds after a dip in use during 2020."
Spending in private health insurance plans grew the most, at an 11.5% increase, followed by Medicare, where spending grew by 8.1%. Spending in private plans accounted for 30% of total national spending, reaching $1.5 trillion.
Medicare, meanwhile, accounted for about 21% of total healthcare spending at $1 trillion in 2023, according to the analysis. Medicaid spending made up 18% of the total, with spending growing by 7.9% last year, a slower growth rate than that found in 2022 or 2021.
Spending on hospital care grew by 10.4% in 2023, reaching $1.5 trillion. That's a far faster rate than the 3.2% recording in 2022 and marks the fastest growth rate since 1990, according to the report. Hospital discharges increased by 1.6% in 2023, and outpatient hospital service use among Medicare beneficiaries also increased last year.
Spending on physician and clinical services also increased, rising by 7.4% to reach $978 billion. Spending in this category accelerated in private insurance and Medicare as well as in patients' out-of-pocket costs, CMS' actuaries found.
The report also noted that spending on prescription drugs grew at a faster rate in 2023 than in 2022. Spending on retail prescriptions increased by 11.4% to reach $449.7 billion, compared to a 7.8% growth rate in 2022.
While the analysis did not break down specific drug classes or types, the actuaries found that increased spending on drugs for obesity and diabetes represented a key driver in accelerating pharmaceutical spending.
Martin said these drugs played a role across Medicare, private insurance and Medicaid in increasing drug costs. For example, per-member per-month spending on anti-obesity drugs in Medicare Part D increased by 35% in 2023, she said.
"That significantly contributed to Medicare prescription drug spending growth of 12.2% reported in this analysis," Martin said.