Expert projections suggest some moderation in U.S. health spending in the coming years. Moreover, the effects of Medicare reforms, drug pricing negotiations, and economic factors will shape the trajectory of healthcare costs through 2032.
Per capita health spending growth is expected to decrease
Peterson-KFF Health System Tracker, in combination with the Office of the Actuary in the Centers for Medicare & Medicaid Services, suggests a temporary slowdown in per capita health spending growth.
More specifically, the experts state, "In 2024, per capita health spending growth is estimated to have slowed to 4.5%. Growth is expected to slow further in 2025 and 2026 to 4.2% and 4.3%, respectively."
However, from 2027-2032, "per capita spending growth is projected to moderate at an average annual rate of 5.0%." Driving this trend is the Inflation Reduction Act (IRA), which is expected to put downward pressure on growth starting in 2026 through Medicare drug price reforms.
Prescription drug spending growth and uncertainty
Prescription medication costs continue to be a significant contributor to total health expenditures. With the implementation of the IRA's negotiated drug pricing, it is anticipated that the per capita retail prescription drug spending rise will average 5.4% from 2026 to 2032.
Although these improvements could help cost control, these predictions are still subject to uncertainty because of "the potential introduction of new drugs, especially for diabetes, cancer, and autoimmune diseases."
Changes in out-of-pocket spending
Centers for Medicare and Medicaid Services (CMS) actuaries predict that per capita out-of-pocket spending growth will average 3.5% between 2025 and 2032, following a relatively erratic rise in the early 2020s.
It is also anticipated that the IRA's modifications to Medicare prescription drug benefits, including removing catastrophic coverage coinsurance and implementing a $2,000 Part D out-of-pocket cap, will reduce the financial strain on Medicare recipients.
Hospital and physician services spending remains stable
In 2025 and 2026, the growth in overall hospital spending is anticipated to be steady. However, from 2027 to 2032, spending is expected to rise at an average annual rate of 5.6%.
After years of sharp rises, spending on clinical and physician services is also anticipated to stabilize. It is projected that the yearly change in total physician and clinic spending will be 4.9% in 2025 and 4.8% in 2026.
“From 2027-2032, physician and clinical services growth is expected to moderate at an average annual rate of 5.5%," experts added.
Health spending as part of GDP
According to Peterson-KFF, “Health spending growth is expected to outpace growth in the overall economy and eventually hit 19.7% of GDP by 2032."
So, nearly one-fifth of the country’s economic output will be dedicated to healthcare.
Inflation, labor shortages, and economic conditions may cause costs to exceed projections.
However, these predictions are unclear due to several outside influences, as evidenced by "The COVID-19 pandemic and its long-term effects on health spending [making] projections even more difficult than in normal years, and even small differences in growth rates can add up to large spending differences over time."
Changing long-term projections
In 2015, CMS estimated that total health expenditures would reach $5.6 trillion by 2025, but current projections now place that number at $5.3 trillion.
The bottom line
Consumers should be informed about these trends, as they will likely impact insurance premiums, out-of-pocket costs, and overall affordability in the healthcare system.
Learn more: How HIPAA compliant emails reduce healthcare costs
FAQs
What factors contribute to rising health spending?
Major factors include medical price inflation, prescription drug costs, an aging population, and workforce shortages.
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