Hospitals are a leading driver of U.S. health care spending growth, accounting for roughly one-third of national health expenditures in 2024 and driving costs for families, employers, Medicare, Medicaid and other payers, according to a new analysis from the Kaiser Family Foundation (KFF).
Between 2022 and 2024, hospital care accounted for 40% of total spending growth, nearly double the next-largest category, physician and clinical services (22%), KFF found. Retail prescription drugs made up 11%, home health care and nursing care each 5%, while spending on government public health activities declined 7%, likely reflecting the winding down of COVID-19–related efforts, the report said. All other goods and services, including some long-term care supports, contributed 13% of growth.
National health spending reached $5.3 trillion in 2024, representing 18% of U.S. GDP, a $692 billion increase from 2022, when total spending was $4.6 trillion, KFF reported. Hospital care accounted for $277 billion of that growth, underscoring its outsized role. Last year, the average annual premium for employer-sponsored family coverage approached $27,000, with workers contributing roughly $7,000 out of pocket, KFF said.
From 2022 to 2024, hospital expenditures rose 20%, compared with 15% growth for total national health spending. Several other categories, including retail prescription drugs (20%), other professional services (25%), home health care (23%) and government administration (24%), also grew faster than total spending but contributed less to overall growth due to smaller 2022 baselines, KFF's analysis said.
The impact of hospital spending growth is not a new development. From 2005 to 2024, hospital spending grew from $609 billion to $1.6 trillion, a $1 trillion increase, while total health spending rose from $2 trillion to $5.3 trillion, according to KFF. Hospitals accounted for roughly 32% of overall spending growth, compared with 22% for physician and clinical services and 8% for retail drugs. The Centers for Medicare & Medicaid Services (CMS) projects hospitals will maintain about a 32% share of growth through 2033, slightly below the recent 40% share.
From 2005 to 2024, hospital spending as a share of GDP rose from 4.7% to 5.6%, while total health care spending increased from 15.5% to 18%. CMS projects hospital spending will reach 6.4% of GDP by 2033, with total health expenditures at 20.3%.
The long-term growth reflects both rising prices and greater utilization, particularly outpatient care, the analysis said. Between 2005 and 2024, hospital prices rose 61%, while total inpatient days declined 5%. Outpatient visits, by contrast, increased 44%, the report said.
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