Healthcare costs in the United States surged to $5.3 trillion in 2024. This marked a 7.2% increase from $4.9 trillion in 2023, according to new data released by the Centers for Medicare & Medicaid Services (CMS).
Moreover, the CMS report reveals that this growth was primarily driven by higher insurance enrolment and a sharp increase in the use of medical services. The surge was particularly noticeable under private health insurance plans.
The latest figures show that US healthcare spending in 2024 accounted for 18% of GDP. This was a rise from 17.7% in 2023. Health spending continues to outpace overall economic growth. Consequently, this trend reinforces concerns about long-term affordability and efficiency within the healthcare system.
Administrative Costs See Largest Surge in Government Spending
The CMS highlighted that the largest component of spending growth came from government administrative costs, which rose 14.7% in 2024. In contrast, these costs rose 7.8% in 2023. Furthermore, the Medicaid programme saw a particularly sharp rise in administrative expenses, up 19.8%. This was nearly double the 2023 growth rate.
These increases were primarily linked to post-COVID policy changes. As emergency Medicaid coverage policies expired, complex re-enrolment and eligibility processes boosted administrative demands.
Medical Service Use and Insurance Coverage Fuel Growth
Rising demand for healthcare services - especially among individuals covered by private insurance plans - contributed significantly to the overall spending spike. In addition, spending on services provided by non-physician professionals rose 10.8%. Home healthcare spending also increased 10.2%.
Hospital care spending totalled $1.6 trillion, up 8.9%. Although this reflects a slower pace compared to 2023’s 10.6% growth, it remains a substantial increase. Hospital pricing rose 3.4%, marking the fastest annual increase since 2007, further fuelling total cost growth.
ACA Enrolment Surges, Driven by Medicaid Disenrolment
The Affordable Care Act (ACA) also saw significant enrolment growth in 2024. The number of people covered under ACA plans rose by more than 30% to 21.1 million, up from 16.2 million in 2023. Significantly, CMS attributes this rise to a special enrolment period that enabled individuals who lost Medicaid coverage after the pandemic to transition to ACA marketplace plans.
Overall, private health insurance coverage rose by 3.5%. It covered 214.3 million Americans in 2024, up from 207 million the year before.
Efficiency and Affordability in Focus
The CMS report on US healthcare spending in 2024 underscores the enduring challenge of containing rising costs while expanding coverage. With enrolment surges and service use continuing to climb, healthcare administrators and policymakers face renewed pressure. As a result, they must ensure sustainable funding models.
The administrative burden tied to shifting enrolment policies and expanding access, particularly through Medicaid and ACA pathways, is becoming an increasingly visible driver of cost growth. As healthcare spending takes a larger share of the national economy, cost containment strategies and operational efficiency will be critical in the years ahead.