Spending hit $5.3 trillion in 2024, but the shift to marketplace plans and a sicker Medicaid pool means more dollars might not be enough to maintain healthy margins.
U.S. healthcare spending hit $5.3 trillion in 2024, growing 7.2% year-over-year, according to the newly released National Health Expenditure Accounts report. For the second year in a row, health spending growth outpaced the broader economy, pushing healthcare’s share of GDP to a staggering 18%.
For revenue cycle leaders, the top-line number matters less than the why. The 2024 data show that increased utilization, especially around hospital care, is driving spending higher.
Volume is the Driver
Increased healthcare spending goes beyond simple price hikes. In 2024, while spending increased by 7.2%, medical price growth was actually slower than overall inflation at 2.4%, but demand for care accelerated.
This suggests that the post-COVID rebound wasn’t a temporary blip. With hospital days up 1.5% and discharges up 3.2%, revenue cycle leaders can no longer rely on rate increases to maintain healthy margins. Instead, the focus needs to shift to managing volume and reducing inefficiency.
Medicaid Enrollment is Falling
Medicaid enrollment fell by 7.9 million in 2024 from a peak of 92.2 million, due to the end of the continuous enrollment provision implemented during the COVID-19 pandemic.
Enrollment will likely accelerate as provisions of the One Big Beautiful Bill Act go into effect over the next several years. Remaining enrollees will, on average, be sicker and more costly to care for. Providers need to prepare for a time when Medicaid patients will become more prone to eligibility gaps and simultaneously require more intensive treatment.
Hospital Care is Growing Faster Than Everything Else
Spending on hospital services grew 8.9% in 2024 to a total of $1.6 trillion. This followed 10.6% growth in hospital spending in 2023. If spending in this area continues to rise, it could become a target for regulators and payers. Revenue cycle leaders should be on the lookout for efforts to expand site-neutral payment policies and price transparency enforcement.
Private Payers Are Carrying the Load
Spending by commercial payers grew by 10.4% in 2024, driven largely by record enrollment in marketplace plans. While this growth may seem beneficial to providers on the surface, these plans typically reimburse at lower rates than employer-sponsored plans. Moving forward, revenue cycle leaders must audit contracts to ensure their health systems are not doing more work for lower rates.
Luke Gale is the revenue cycle editor for HealthLeaders.
KEY TAKEAWAYS
The 7.2% spending jump in 2024 was driven primarily by a sustained increase in utilization following the COVID-19 pandemic.
Medicaid enrollment trends, which may accelerate under the One Big Beautiful Bill Act, are leading to a higher-acuity, lower-margin patient population.
The 10.4% spike in private payer spending comes in large part from lower-paying Marketplace plans that drag down overall commercial margins.