US Health Expenditures Projected to Reach $8.97 Trillion by 2034
Projections from the Centers for Medicare & Medicaid Services (CMS) forecast U.S. health expenditures will rise to $8.97 trillion by 2034, with a likely decrease in the percentage of insured individuals. Jacqueline Fiore, PhD, an economist with CMS's Office of the Actuary, emphasized that increased healthcare service utilization and rapid growth in spending on retail prescription drugs are core drivers of this surge.
Legislative frameworks like the Inflation Reduction Act and the One Big Beautiful Bill Act are anticipated to influence health spending trends and insurance coverage through 2028. These measures contribute to the expected decrease in the insured population during this period. Furthermore, the federal government’s share of health costs is set to increase, primarily due to Medicare expansion.
Fiore indicated that health spending growth is projected to average 5.4% annually through the forecast period, outstripping GDP growth. As a result, healthcare’s share of the economy is expected to rise from 18.0% in 2024 to 20.6% by 2034. Detailed projections are available in Health Affairs.
Private health insurance spending is expected to slow down, from 8.2% growth in 2025 to 6.3% in 2026, due to declining enrollment. This drop is largely due to the expiration of enhanced premium tax credits from the Affordable Care Act exchanges, expected to reduce directly purchased insurance enrollment by 3.7 million, lowering the insured population from 91.7% in 2025 to 90.8% in 2026.
Medicare stands out with projected significant spending growth, averaging 7.7% annually from 2025 to 2034, driven by increasing per-enrollee spending and demographic-led enrollment growth. Retail prescription drugs will see the fastest growth among major spending categories, spurred by high-cost drugs and increased utilization.
A new Medicare rule, addressing overpayment issues found by the Office of the Inspector General at HHS regarding skin substitutes, is set to cut payments for these products by over 90% starting fiscal year 2026. This regulation aims to reduce Medicare spending on these services, with growth expected to slow from 5.8% in 2025 to 2.0% in 2026.
From 2029 to 2034, spending on physician care and clinical services is anticipated to grow by about 5.5% annually, based on historical trends, as noted by John Poisal, deputy director of CMS's national health statistics group. Medicaid spending on physician and clinical services is expected to accelerate to 9.4% in 2025. Additionally, Medicare prescription drug spending growth is projected to remain high, driven by oncology drug utilization, though these figures for 2024 and 2025 remain projections due to complex data analysis requirements.