U.S. health care spending is growing faster than the GDP and is expected to reach $9 trillion by 2034, the Centers for Medicare & Medicaid Services announced on Wednesday.
Among the major funding sources, Medicare spending is expected to grow the fastest between 2025 and 2034, at an average of 7.7% per year. By contrast, both Medicaid and private health insurance spending are projected to grow by 5% per year during the same period.
Among major health spending categories, growth in retail prescription drug spending is expected to be fastest at an average of 5.7% per year, followed by physician and clinical services spending at 5.5% and hospital spending at 5.2% The insured share of the population is projected to be 90.5% in 2034, compared to 91.8% in 2024. The federal government-sponsored share of spending is expected to continue to increase, from 31% in 2024 to 33% in 2034.
Increased utilization, the growing popularity of GLP-1 drugs for weight loss and the rising cost of many specialty drugs are fueling prescription drug spending trends. Retail prescription drug spending grew by 11.1% in 2025, up from 7.9% in 2024, to reach $518.7 billion. In addition, the implementation of a cap on out-of-pocket spending and a manufacturer discount program specified by the Inflation Reduction Act affected Medicare prescription drug growth.
Retail prescription drug spending is expected to slow to 8.2% this year because of lower -- but still strong -- expected growth in utilization. Medicare Part D drug price negotiations begin this year, which are expected to further shift some costs from beneficiaries to Medicare.
Looking ahead, moderating growth in the use of diabetes and obesity drugs, as well as adaptation to the Inflation Reduction Act Medicare Part D benefit structure and price negotiations implemented in previous periods, are expected to result in 5.1% average annual growth in 2027 and 2028 and 4.6% growth from 2029 to 2034.
Overall, CMS projects that national health spending growth will slow to 6.3% this year, due in part to moderating use. Direct-purchase insurance enrollment is expected to decline by 3.7 million, largely because of the expiration of enhanced Marketplace subsidies. Looking at specific health care sectors in 2026, CMS expects hospital spending to grow by 5.8% and physician and clinical services spending to grow by 5.6%.
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