Key Takeaways

  • U.S. health care spending reached $5.3 trillion in 2024 and is projected to grow faster than the overall economy through 2033, according to CMS actuaries.
  • Increased service utilization, demographic changes, and rising demand for hospital and prescription drug care are major drivers of long-term spending growth.
  • Research suggests telehealth may lower costs when it replaces in-person visits, though its overall impact on national health spending will depend on how it is integrated into care delivery and reimbursement models.

U.S. health care spending is expected to continue rising faster than the broader economy over the next decade, according to the January 2026 projections from the Centers for Medicare & Medicaid Services (CMS).

National Health Expenditures Reach $5.3 Trillion

Federal data show that national health expenditures reached $5.3 trillion in 2024, representing about 18% of the U.S. economy, and grew 7.2% that year amid increased demand for medical services and more complex services provided. In comparison, 2023 saw a similar 7.5% increase in health care expenditure ($4.9 trillion) from 2022, with health care accounting for about 17.6% of Gross Domestic Product (GDP). This meant that, on average, an individual spent $15,474 in 2024 compared with $14,570 in 2023 for their health care.

The 2024 data show that spending increases since 2023 included private health insurance of 8.8%, Medicare of 7.8%, other third-party payers and programs of 7.0%, Medicaid of 6.6%, and out-of-pocket of 5.9%. The increase in expenditure is influenced by general population growth, a 2.5% increase in health care prices, and the usage, complexity, and intensity of services provided. According to Fierce Healthcare, a statistician for the National Statistics Group at CMS, Micah Hartman believes that while the 2.5% overall price increase in health care expenditure is equal to price growth across the general economy, the visible increase in usage and the type of usage are significant factors in the 2024 spending increase.

CMS reported that while hospital (8.9%) and prescription drug (7.9%) spending increased, their growth was slower than that seen between 2022 and 2023. Meanwhile, physician and clinical services expenditures rose by 8.1% in 2024, faster than the 7.4% increase in 2023.

Utilization Rebound Following the Pandemic

In the Health Affairs published analysis of the CMS data, the authors, CMS actuaries, state “a high insured share [population] combined with the continued rebound in utilization from the somewhat suppressed levels during the COVID-19 public health emergency, particularly for those with private health insurance, contributed to the robust national health spending growth (8.2 percent) projected for 2024.” The percentage of the population insured has decreased from 92.5% in 2023 to 91.8% in 2024.

Rising Costs Felt by Households

A look at the individual experience of health care costs provides meaningful context. A 2025 Gallup poll of nearly 20,000 U.S. adults found that almost a third had cut back on daily expenses to afford health care costs. The survey found that 15% of respondents delayed prescriptions or borrowed money to pay medical bills, while 11% said they skipped meals to cover their health care costs.

With changes to Medicaid, the CMS focus on decreasing health care expenditure, and the failure to extend enhanced Affordable Care Act (ACA) premium subsidies in December 2025, a change in how individuals in the U.S. are insured (or not) is expected. Relatedly, recent numbers show that about 23 million individuals signed up during the now-shortened open enrollment for ACA, aka “Obamacare,” coverage for 2026, which is about 1.3 million fewer than in 2025.

The Director of CMS, Dr. Mehmet Oz, believes this enrollment in ACA coverage is still too high, citing concerns about fraudulent enrollment, duplicate coverage, mistaken enrollment, or improper enrollment. Improper enrollment occurs when the individual is more appropriately covered by Medicaid or private employer-sponsored insurance. The administration reiterates its focus on combating fraud and misuse of federal health care spending, which it cites as the cause of wasteful health care expenditure. CMS projects that overall health care spending growth will remain elevated in the near term, increasing 8.2% in 2024 and about 7.1% in 2025, before moderating later in the decade. Over the long term, national health expenditures are expected to grow at an annual rate of around 5.8% from 2024 to 2033, outpacing overall economic growth.

As a result, health care’s share of the U.S. economy is projected to climb from 17.6% of gross domestic product in 2023 to about 20.3% by 2033, according to CMS projections. CMS actuaries say the growth reflects multiple factors, including increased use of medical services, rising demand for hospital care and prescription drugs, and demographic changes such as an aging population enrolling in Medicare.

Policymakers and health economists say the projections underscore the continuing challenge of managing health costs while maintaining access to care across public programs such as Medicare and Medicaid, as well as private insurance markets.

What Rising Costs Could Mean for Telehealth

As overall health spending continues to rise, policymakers and health systems are increasingly evaluating whether telehealth could help moderate some costs associated with traditional care delivery.

Recent research suggests telehealth visits can be less expensive in certain clinical scenarios, specifically when they substitute for in-person appointments. The study analyzing billing data found that telemedicine visits were substantially less costly on average than comparable office visits, with some estimates showing savings of hundreds of dollars per visit.

In a preliminary look at research currently undergoing peer review, one study examining telehealth-initiated episodes of care found that they were associated with lower downstream Medicare spending and reduced use of diagnostic services such as laboratory tests and imaging, suggesting that remote visits may reduce overall spending when they replace in-person care rather than add new utilization.

Still, the overall cost impact of telehealth depends heavily on how it is used. If telehealth visits substitute for office visits, they may lower costs; however, if they lead to additional visits or duplicated care, total spending could rise.

For clinicians and health systems facing growing cost pressures, some research suggests telehealth may offer efficiency gains in some settings, particularly for routine follow-ups, behavioral health services, and chronic disease management. Its long-term financial impact will depend on reimbursement policies, care models, and whether telehealth continues to function primarily as a replacement for in-person care rather than an added layer of services.

Digital Health’s Role in Future Spending

As national health spending continues to rise, policymakers and health systems are increasingly exploring digital health tools to improve efficiency and manage costs. Telehealth, remote monitoring, and AI-supported care models are often cited as technologies that could streamline routine care, reduce administrative burdens, and expand access to clinicians. However, the overall cost impact of these technologies will depend on how they are integrated into care delivery and reimbursement models. As federal spending through programs such as Medicare and Medicaid grows, decisions about telehealth coverage, payment policies, and digital health oversight are likely to play an increasingly important role in shaping the nation’s health spending trajectory.

Read the article at telehealth.org