Introduction

Nationwide healthcare spending has risen quickly over time – reaching $5.3 trillion and 18% of GDP by 2024 – and is anticipated to proceed rising sooner or later. The expansion in well being care spending contributes to larger prices for households, employers, Medicare, Medicaid and different payers. In 2025, common annual premiums for employer-sponsored household protection had been $26,993, with workers paying $6,850 for his or her protection, in accordance with KFF’s annual survey of employers. Hospital care accounted for almost a 3rd of nationwide well being care spending in 2024, and has greater than doubled in nominal phrases over the previous 20 years, making hospitals a significant driver of well being care spending development over time.

This information word analyzes the extent to which hospital spending has contributed to nationwide well being care spending development in recent times (2022-2024) and over the long run (2005-2024) utilizing information from the Facilities for Medicare & Medicaid Providers (CMS) Nationwide Well being Expenditures Accounts (NHEA). (See Key Hospital Info for extra data on hospital spending and the Peterson-KFF Well being System Tracker for extra data on nationwide well being care spending).

Hospital spending was accountable for 40% of the expansion in nationwide healthcare spending between 2022 and 2024, a far higher share than some other spending class

Nationwide healthcare spending elevated by $692 billion from 2022 to 2024, from $4.6 trillion to $5.3 trillion. Throughout this era, spending on hospital care alone accounted for $277 billion in spending development, or 40% of the whole enhance in nationwide well being care spending (Exhibit 1). Hospital care’s massive contribution to general well being care spending development displays the truth that hospital spending accounted for almost a 3rd of nationwide well being care spending in 2022 (30%) and grew quicker than nationwide well being care spending general in each 2023 (10.6% vs. 7.4%) and 2024 (8.9% vs. 7.2%).

Hospital spending development in 2023 and 2024 was primarily attributable to a “rebound in non-price elements, corresponding to utilization and depth of companies, which had been considerably depressed through the [COVID-19] Public well being emergency,” CMS stated. Nonetheless, hospital costs, which rose 2.7% in 2023 and three.4% in 2024, additionally performed a task. In actual fact, in accordance with CMS, 2024 noticed the quickest development in hospital costs since 2007. Hospital worth development contains Medicare and Medicaid in addition to industrial costs; hospital costs in these public packages have grown extra slowly than industrial costs over time.

The contribution of hospital care to complete expenditure development was higher than that of different main expenditure classes. Physicians and medical companies accounted for the second largest share of the expansion, at 22%. Retail prescription drug spending, which grew at about the identical fee as hospital spending over the interval between 2022 and 2024, accounted for 11% of the expansion over this era (Appendix Desk 1). Spending on non-medical insurance coverage bills, different skilled companies, house well being care, nursing care and persevering with care retirement communities, dental companies and authorities administration accounted for a smaller share. Spending on authorities public well being actions decreased by 7% throughout this era, possible because of the suspension of actions associated to the COVID-19 pandemic. Spending on all different items and companies, together with some long-term companies and helps, accounted for 13% of complete expenditure development.

Hospital spending grew quicker (20%) than complete healthcare spending (15%) between 2022 and 2024. Prescription drug retail gross sales (20%), different skilled companies (25%), house well being care (23%), and authorities administration (24%) additionally grew quicker than general well being care spending, though these classes contributed much less to general development than hospitals as a result of they’d decrease base spending in 2022.

Over an extended interval, 2005-2024, hospital spending accounted for 32% of the whole enhance in nationwide well being care spending development, whereas spending on physicians and medical companies accounted for 22% and spending on prescribed drugs accounted for 8% (Appendix Desk 2). CMS predicts that hospitals will once more account for the same share of spending development (32%) by means of 2033, in comparison with the 40% share that hospitals have accounted for in recent times.

Hospital spending per 12 months has elevated by $1 trillion over the previous 20 years and by $277 billion between 2022 and 2024

Hospital spending elevated from $609 billion in 2005 to $1.6 trillion in 2024, a rise of $1.0 trillion (Determine 2). Throughout this era, complete well being care spending elevated by $3.3 trillion, from $2.0 trillion to $5.3 trillion. In more moderen years, hospital spending has elevated from $1.4 trillion in 2022 to $1.6 trillion in 2024, a rise of $277 billion.

Development in hospital spending over the previous 20 years has been higher than development in spending on doctor and medical companies (the second largest enhance), and considerably higher than development in retail gross sales of prescribed drugs (the third largest enhance).

Spending on hospital care particularly and nationwide well being care spending have each exceeded general financial development over time. Hospital expenditure elevated from 4.7% to five.6% of GDP between 2005 and 2024, whereas complete healthcare expenditure elevated from 15.5% to 18.0% of GDP over the identical interval. CMS predicts that hospital spending will rise to six.4% of GDP by 2033, whereas nationwide healthcare spending will rise to twenty.3% of GDP.

The expansion in hospital spending over the previous 20 years has been pushed primarily by will increase in each costs and the amount of companies supplied, particularly when outpatient care can be taken under consideration. From 2005 to 2024, hospital costs elevated 61% based mostly on KFF evaluation of the Producer Value Index (PPI). By way of quantity, though complete hospitalization days decreased 5% (17% per 1,000 residents), outpatient visits elevated 44% (25% per 1,000 residents), based mostly on KFF evaluation of the AHA Trendwatch Chartbook and the AHA Annual Survey Database. Continued development in hospital spending will contribute to larger prices for public packages like Medicare and Medicaid, employers and households, and exacerbate ongoing considerations about well being care affordability.

Appendix