U.S. health spending surged 7.5% in 2023 to a staggering $4.9 trillion, marking the highest growth rate in two decades outside the pandemic spike. This translates to $14,570 per American as healthcare costs continue their relentless climb.
The acceleration, reported by the American Medical Association, represents a significant jump from the 4.6% increase seen in 2022. Excluding the 10.4% pandemic-driven rise in 2020, this is the steepest growth since 2003.
For the first time since the pandemic began, healthcare spending growth (7.5%) outpaced GDP growth (6.6%). The sector now represents 17.6% of the entire U.S. economy, similar to pre-pandemic levels.
Record Insurance Coverage
Experts attribute this growth partly to unprecedented insurance coverage rates. “The acceleration in 2023 was driven by higher utilization of health care goods and services as well as a historically high 92.5% insured share,” the AMA noted in its analysis.
The Centers for Medicare and Medicaid Services (CMS) places the insured figure even higher, at a record 93.1% in 2023, according to their National Health Expenditure data.
This trend shows no signs of slowing. Over the 2023-2032 period, average healthcare spending growth (5.6%) is projected to outpace average GDP growth (4.3%), pushing healthcare’s share of the economy to nearly 20% by 2032.
Profit Growth Accelerates
The financial implications are substantial. Healthcare profit pools are expected to grow at a 7% compound annual growth rate, from $583 billion in 2022 to $819 billion in 2027, analysis from McKinsey & Company shows.
Certain segments are growing even faster. Medicare Advantage, which has historically grown by 9% annually from 2019 to 2022, is expected to moderate slightly to 5% annual growth through 2027.
Other high-growth areas include outpatient care settings, healthcare software platforms, and specialty pharmacy services.
Employment Boom
The healthcare sector has become an employment powerhouse, adding more than one million workers since the pandemic began. Despite initially losing 1.6 million jobs at the onset of COVID-19, the industry has since added 2.6 million positions.
From March 2022 to March 2024 alone, healthcare employment grew by 8.2% — more than double the 3.8% growth rate seen across all other sectors, data from Altarum indicates.
This rapid expansion reflects both recovering demand for care and the growing needs of an aging population.
“Reflects broad increases in the use of care associated with the insured share of the population of 93.1% – an unprecedented high,” CMS noted in its assessment of the current healthcare landscape, suggesting that as more Americans gain insurance coverage, utilization of healthcare services continues to climb.