Healthcare Spending Projected to Exceed $8.5 Trillion by 2033

Healthcare Cost Drivers

CMS found that overall healthcare spending growth has decreased slightly but is still elevated compared to pre-pandemic levels and is expected to continue to moderately grow. This article examines the factors underlying the forecasts.

On June 25, 2025, the Centers for Medicare and Medicaid Services (CMS) released its forecast on U.S. healthcare spending through 2033. The analysis, published in Health Affairs, estimated healthcare spending growth in 2024 and projected the growth into 2033. CMS found that overall healthcare spending growth has decreased slightly but is still elevated compared to pre-pandemic levels, and is expected to continue to moderately grow. This article examines the factors underlying the forecasts.

Total healthcare spending grew an estimated 8.2% in 2024 (to over $5.2 trillion), but is expected to moderate over the next few years, to an average of 5.8% annual growth, culminating in projected national health expenditures exceeding $8.5 trillion by 2033.[1] Healthcare spending as a share of the U.S. gross domestic product (GDP) slightly increased from 2023 to 2024, from 17.6% to 18.0%; the healthcare share of GDP is anticipated to reach 20.3% by 2033, as the overall GDP is expected to increase at an annual average of only 4.3%.[2]

Examining healthcare expenditures across service categories, hospital expenditures grew 10.4% in 2023 and 9.2% in 2024, the highest growth rates since the early 1990s.[3] Hospital care spending is expected to grow 5.9% per year from 2024 to 2033, comprising 31% of overall healthcare spending.[4] Similarly, expenditures on physician and clinical services are expected to increase 5.5% annually (comprising 20% of healthcare spending), slower than the 7.8% growth in 2024.[5] Growth in both categories are a result of nonprice factors, including utilization and insurance enrollment.[6] Prescription drug expenditures increased 10.1% in 2024 (comprising 9% of healthcare spending), a slightly slower rate than 2023’s spending increase of 11.4%.[7] This slowdown, despite increased use of diabetes and obesity drugs (which are typically higher-cost, brand-name drugs), is attributed to a decrease in private health insurance drug spending and a decline in Medicaid enrollment.[8]

Analyzing expenditures by payor, the federal government will continue to account for an increasingly larger share of healthcare spending (from 39% in 2024 to 44% in 2033), followed by households (27%), private businesses (18%), state and local governments (15 to 16%), and other private revenues (6 to 7%).[9]

Federal government spending jumped over three percentage points from 2023 to 2024, and is expected to grow at an accelerated annual rate of 6.4% through 2033.[10] This is driven largely by Medicare’s spending increase of 8.3% in 2024 (similar to 2023) and is attributable to a mix of factors, including a deceleration in Medicare Advantage capitation rates and accelerated growth in both fee-for-service payments and Medicare prescription drug spending.[11] Through 2033, the spending growth is expected to average approximately 7.4%; this moderation is largely due to the last of the Baby Boomers entering Medicare by 2029 and reductions in Medicare drug spending as a result of various Inflation Reduction Act (IRA) provisions.[12]

State and local governments experienced a substantial spending growth of 17.3% in 2024 (down from 18.4% in 2023), with spending decelerating to 6–8% between 2025 and 2033.[13] Household health spending increased an estimated 7.5% in 2024, up from 6.8% in 2023.[14] Finally, spending by private businesses increased approximately 8% in 2024, a notable deceleration from 2023’s 11% increase.[15] Notably, this growth is expected to significantly slow to 3.9% by 2033, largely due to an anticipated 1.3 million enrollment increase.[16]

In terms of insurance coverage, the number of uninsured individuals increased slightly in 2024, to 26.6 million.[17] Enrollment increased in Medicare and private insurance, but decreased in Medicaid.[18] The Medicaid enrollment drop can be attributed to the post-pandemic reversion to previous Medicaid criteria.[19] However, CMS cautioned against relying on Medicaid spending projects due to external factors rendering projections difficult.[20] Although the national insurance rate decreased slightly in 2024, it is still near the record high of 92.5% set in 2023.[21] Through 2033, the insured population is expected to continue to moderately decrease, to 91.3%.[22]

The 2024 estimated healthcare spending appears to reflect the last of the pent-up utilization from the COVID-19 pandemic, leading (in theory) to moderated spending going forward. However, it appears that healthcare spending may be subject to ongoing volatility and unpredictability if the budget reconciliation bill, which includes approximately $1 trillion in healthcare cuts, is passed through Congress.[23] As noted by CMS:

“many notable enrollment changes are expected to occur (including the completion of Medicaid unwinding and the expiration of the IRA’s temporarily enhanced premium tax subsidies for Marketplace plans in 2026), leading to a somewhat lower insured share of the population. Although the projections presented here reflect current law, future legislative and regulatory health policy changes could have a significant impact on the projections of health insurance coverage, health spending trends, and related cost-sharing requirements, and they thus could ultimately affect the health share of GDP by 2033.”[24]

This article was previously published by HCC Health Capital Topics, Volume 18, Issue 6, June 2025, and is republished here by permission.

[1]        “National Health Expenditure Projections, 2024–33: Despite Insurance Coverage Declines, Health To Grow As Share Of GDP” By Sean P. Keehan, et al., Health Affairs, June 25, 2025, https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2025.00545 (Accessed 6/26/25).

[2]        Ibid.

[3]        Ibid.

[4]        Ibid.

[5]        Ibid.

[6]        Ibid.

[7]        Ibid.

[8]        Ibid.

[9]        Ibid.

[10]     Ibid.

[11]     Ibid.

[12]     Ibid.

[13]     Ibid.

[14]     Ibid.

[15]     Ibid.

[16]     Ibid.

[17]     Ibid.

[18]     Ibid.

[19]     Ibid.

[20]     Ibid.

[21]     Ibid.

[22]     Ibid.

[23]        “US health spending projected to hit $8.6T by 2033” By Bridget Early, Modern Healthcare, June 25, 2025, https://www.modernhealthcare.com/finance/mh-us-health-spending-2033/ (Accessed 6/26/25).

[24]     “National Health Expenditure Projections, 2024–33: Despite Insurance Coverage Declines, Health To Grow As Share Of GDP” By Sean P. Keehan, et al., Health Affairs, June 25, 2025, https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2025.00545 (Accessed 6/26/25).

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Todd A. Zigrang, MBA, MHA, FACHE, CVA, ASA, ABV, is president of Health Capital Consultants, where he focuses on the areas of valuation and financial analysis for hospitals and other healthcare enterprises. Mr. Zigrang has significant physician-integration and financial analysis experience, and has participated in the development of a physician-owned, multispecialty management service organization and networks involving a wide range of specialties, physician owned hospitals, as well as several limited liability companies for acquiring acute care and specialty hospitals, ASCs, and other ancillary facilities.

Mr. Zigrang can be contacted at (800) 394-8258 or by e-mail to tzigrang@healthcapital.com.

Jessica Bailey-Wheaton, Esq., is vice president and general counsel for Heath Capital Consultants, where she conducts project management and consulting services related to the impact of both federal and state regulations on healthcare exempt organization transactions, and provides research services necessary to support certified opinions of value related to the fair market value and commercial reasonableness of transactions related to healthcare enterprises, assets, and services.

Ms. Bailey-Wheaton can be contacted at (800) 394-8258 or by e-mail to jbailey@healthcapital.com.