The U.S. healthcare system continues to experience rapid spending growth even after the disruptions of the COVID-19 pandemic, according to an AMA Policy Research Perspective report on health spending trends.
Strong demand for healthcare goods and services drove this growth as insurance coverage remained historically high at 91.8%, according to AMA economist Allen Hardiman, PhD, author of the report.
National healthcare spending reached nearly $5.3 billion in 2024, an increase of 7.2% over the previous year, marking the second consecutive year of growth above 7%. At $15,474 per capita, healthcare spending once again outpaced overall economic growth, accounting for 18% of the nation's gross domestic product (GDP).
Apart from the COVID-19 public health emergency-fueled 10.5% surge in 2020, the 2023–2024 growth rates were the highest recorded since 2003 (8.6%), noted Hardiman. Comparatively, government spending on public health activities such as vaccination campaigns and disease surveillance continued to fall.
Looking ahead, changes in policies to the Affordable Care Act and the One Big Beautiful Bill Act (OBBBA) are important factors to watch.
“These changes could influence health care spending patterns and insurance coverage and enrollment, with potential implications for physicians and patients they serve,” Hardiman said in an interview.
Demand for services drives up personal care
Personal healthcare services made up the largest share of health spending, accounting for 85.4% of all healthcare expenditures, or roughly $4.5 trillion. This reflected an increase of 8.3%, following an even larger 9.4% increase in 2023—the fastest annual growth since 1990.
Hospital care remained the biggest expense at $1.63 trillion, followed by physician services at $829 billion, prescription drugs at $467 billion, and clinical services at $281 billion. Hospital spending rose 8.9% and physician services increased 8.1%, while both prescription drugs and clinical services grew 7.9%.
Higher utilization of healthcare goods and services was behind the trend, Hardiman noted.
Private payers benefit from ACA plans
Private payers financed 31.2% of all health spending, whereas Medicare accounted for 21.2% and Medicaid, 17.7%. Together, health insurance programs paid for nearly three-quarters of all health spending. Out-of-pocket spending by patients represented 10.5% of total spending, a proportion that has gradually fallen over the past two decades as insurance coverage has expanded.
Private health insurance spending “remained robust,” rising 8.8% in 2024 after surging 11.2% in 2023, the report says. Higher demand for medical care and rapid enrollment growth in Affordable Care Act Marketplace plans accounts for this acceleration. Enhanced premium tax credits made Marketplace coverage more affordable, while some individuals who lost Medicaid eligibility during post-pandemic redeterminations transitioned into Marketplace plans instead.
Although the uninsured rate rose slightly in 2024 following the expiration of pandemic-era Medicaid protections, it remained historically low. Hardiman noted that these trends could change as enhanced Marketplace subsidies expire, potentially increasing the number of uninsured Americans in coming years.
Medicaid spending slows
The federal government remained the largest sponsor, contributing 31.3% of all healthcare expenditures, or approximately $1.65 trillion. Compared with several decades ago, its role has expanded substantially, reflecting Medicare growth, Medicaid expansion under the Affordable Care Act, and pandemic-related federal spending.
Households and employers now shoulder a smaller share of total healthcare financing than they did historically, with households supplying 27.6% through insurance premiums, payroll taxes and out-of-pocket payments. Private businesses financed 18.3%, largely through employer-sponsored insurance. State and local governments accounted for another 16.3%.
Looking at individual federal programs, Medicaid spending grew by only 6.6% in 2024 after reaching 9.7% growth in 2022 and 2021. During the pandemic, continuous enrollment requirements under the Families First Coronavirus Response Act produced record enrollment and spending growth. As those protections ended, states resumed eligibility reviews, causing this drop in enrollment and spending growth.
Comparatively, Medicaid spending per enrollee rose sharply because remaining beneficiaries generally required more intensive and costly care. Hardiman noted that Medicaid enrollment and spending are expected to decline under the OBBA.
Medicare spending rises 7.8%
Meanwhile, Medicare spending continued to go up, rising 7.8% in 2024 after a 9% increase the previous year. Over the longer term, Medicare spending is projected to grow rapidly as the last wave of baby boomers ages into Medicare.
The report highlights a continuing shift from traditional fee-for-service Medicare into private Medicare plans, which accounted for more than half of Medicare spending in 2024. Despite a downward trend in enrollment for the sixth year in a row, Medicare fee-for-service spending “accelerated notably” in 2024, Hardiman said.
While the future of U.S. healthcare spending remains uncertain, “policy changes such as the OBBBA and the expiration of enhanced Marketplace subsidies are likely to impact near-term spending and enrollment trends,” particularly for Medicaid and private health insurance, he concluded.
