Overview: A Record-Breaking Year for Health Spending
The Centers for Medicare & Medicaid Services (CMS) now projects that U.S. national health spending reached $5.7 trillion in 2025. That figure represents a 7.3% increase over 2024. Moreover, it marks the third consecutive year of growth exceeding 7%. CMS published this analysis on June 24, 2026, in the journal Health Affairs.
This milestone matters deeply to payers, providers, employers, and policymakers alike. Health spending at this scale touches every corner of the U.S. economy. Understanding what drives it — and where it is headed — is essential for sound planning across the healthcare system.
Why Health Spending Keeps Climbing
Key Drivers Behind the Growth
Several factors combine to push national health spending upward year after year. First, an aging U.S. population drives greater demand for medical services. Second, more Americans now rely on complex, long-term treatments. Third, administrative costs across payers and providers continue to rise. Together, these forces sustain a persistent upward trajectory.
Furthermore, healthcare utilization — meaning the volume of services patients actually use — has grown faster than health prices. This distinction is significant. Analysts sometimes assume that prices alone drive healthcare inflation. However, CMS data shows that utilization trends carry considerable weight.
The Role of Prescription Drugs
One of the most significant contributors to 2025’s growth is the continued demand for high-cost retail prescription drugs. CMS specifically highlights individuals with Medicare and private insurance as the primary consumers driving this surge. Weight-loss medications such as GLP-1 agonists, along with specialty biologics, account for a large portion of this drug spending increase.
Consequently, pharmacy benefit managers, health plans, and hospital systems must all account for this trend in their financial projections. Drug utilization at this scale directly shapes premium structures, formulary decisions, and total cost of care targets.
What Slows the Growth Rate in 2026
Despite strong 2025 numbers, CMS projects the growth rate will slow in 2026. Two primary forces explain this deceleration.
First, Marketplace enrollment is expected to decline. Enrollment in Affordable Care Act Marketplace plans surged in recent years, partly due to expanded subsidies. As those subsidies phase out or shift, fewer individuals will carry Marketplace coverage. This reduces covered utilization and, in turn, overall spending growth.
Second, legislation affecting Medicaid payments and enrollment will also exert downward pressure. Medicaid policy changes at the federal and state levels may reduce covered populations or shift payment rates. Both effects combine to moderate the pace of overall spending growth — even as the absolute dollar figure remains at historic highs.
Payers should therefore anticipate a year of relative stabilization in growth rates, not a reversal. Spending will still increase. Yet the acceleration seen from 2023 through 2025 is likely to ease.
Health Prices vs. Utilization: An Important Distinction
CMS authors noted a key nuance in the data: health price growth has remained fairly moderate. Specifically, prices are expected to average roughly 2.5% annual growth through 2026. That rate sits well below the overall 7%+ growth in total spending.
What This Tells Us
This gap between price growth and total spending growth tells a clear story. Utilization — not price inflation — is the primary engine of rising healthcare costs. Americans are using more healthcare services, visiting more specialists, filling more prescriptions, and accessing more outpatient procedures.
As a result, cost-containment strategies that focus solely on price negotiation may fall short. Health plans, ACOs, and employers must also focus on managing utilization through care coordination, value-based care models, and preventive services. Otherwise, total spending will continue to climb regardless of how well prices are controlled.
Looking Ahead: Health Spending by 2034
The long-term trajectory is equally striking. CMS projects that U.S. health spending will approach $9 trillion by 2034. That projection represents a near-doubling from 2025 levels over less than a decade.
Additionally, the insured share of the U.S. population is expected to decline. In 2025, approximately 91.7% of Americans carry health insurance of some kind. By 2034, that share may fall to 90.5%. While this is a modest percentage drop, it translates to millions of additional uninsured Americans — with significant implications for safety-net hospitals, Medicaid programs, and uncompensated care burdens.
Implications for Long-Term Planning
Health systems and payers must build 10-year financial models that account for this trajectory. Revenue cycle teams should prepare for shifts in payer mix. Governments must address the sustainability of public programs. Meanwhile, employers sponsoring health benefits face the prospect of even steeper cost pressures on their workforce budgets.
What This Means for Payers and Providers
For Health Plans
Payers must revisit their actuarial assumptions. Drug spending trends, utilization increases, and declining Marketplace enrollment will all reshape the risk pool. Plans that rely on stable enrollment growth may face adverse selection challenges. Additionally, Medicare Advantage plans should prepare for continued prescription drug cost pressures from their enrolled populations.
For Hospitals and Health Systems
Providers face a dual challenge. On one hand, rising utilization may drive more patient volume. On the other, Medicaid payment changes could reduce reimbursement for a significant portion of that volume. Hospitals serving large Medicaid populations must develop strategies to offset potential revenue impacts.
For Employers
Self-insured employers face direct exposure to these trends. Drug costs, specialist utilization, and chronic disease management all affect stop-loss thresholds and total plan costs. Many employers are accelerating adoption of high-performance networks and reference-based pricing to counteract rising costs.
Key Takeaways
- U.S. national health spending reached $5.7 trillion in 2025, up 7.3% from 2024.
- This is the third consecutive year of growth above 7%.
- High-cost prescription drugs — particularly among Medicare and privately insured patients — are a leading driver.
- The growth rate will slow in 2026 due to Marketplace enrollment declines and Medicaid policy changes.
- Health price growth averages roughly 2.5%, while utilization growth accounts for most of the total increase.
- By 2034, spending could reach nearly $9 trillion, with the insured population share falling to 90.5%.
