Health Spending Projected to Hit Almost $9 Trillion in 2034

Health expenditures are expected to reach $8.97 trillion by 2034, while the percentage of the population with health insurance is expected to decline for the next several years, said researchers at the Centers for Medicare & Medicaid Services (CMS).

“The main [cost] drivers are high utilization growth across those services, and notably rapid growth in retail prescription drug spending,” Jacqueline Fiore, PhD, an economist in the national health statistics group at the CMS Office of the Actuary, said during a reporter briefing. “Significant legislative provisions from the Inflation Reduction Act and the One Big Beautiful Bill Act are anticipated to affect health spending and insurance coverage trends through 2028. Together, these legislative provisions play a role in reducing the insured population through 2028. And finally, the federal government’s share of health costs is projected to increase through 2034, mainly from Medicare.”

Overall, “health spending growth is projected to average 5.4% [annually] over the projection period, and is expected to grow more rapidly than the gross domestic product,” she continued. This means that healthcare’s share of the economy will increase from 18.0% in 2024 to 20.6% in 2034. The health expenditure projections were reported by Fiore and colleagues in Health Affairs.

But as spending on healthcare rises, private health insurance spending growth is projected to slow from 8.2% in 2025 to 6.3% in 2026, “in large part as a result of a projected decline in private health insurance enrollment,” the authors noted.

The reduction is due in large part to the expiration of enhanced premium tax credits geared toward helping patients buy health insurance policies on the Affordable Care Act’s health insurance exchanges. The expiring tax credits “contribute to a projected decline in direct-purchase insurance of 3.7 million enrollees,” and means the population with health insurance is expected to drop from 91.7% in 2025 to 90.8% in 2026, increasing the number of uninsured people by 3 million, they explained.

In terms of who will be funding healthcare, “over the course of 2025 to 2034, Medicare is projected to experience the highest spending growth, 7.7% per year on average, among the major sources of funding, reflecting faster per-enrollee spending growth and faster enrollment growth, partially driven by demographic factors,” Fiore said. “For the major spending categories, retail prescription drugs is the fastest growing major spending category over the projection period. This is driven by projected elevated growth and utilization in 2025 and 2026, partly attributable to continued demand for high-cost retail prescription drugs, particularly for people enrolled in Medicare and private health insurance.”

Medicare physician spending will be affected in the next few years by a rule adopted in the fiscal year 2026 final Physician Fee Schedule payment rule to address a problem Medicare was having with overpayment for skin substitutes used in wound healing. As MedPage Today reported, the Office of the Inspector General (OIG) at HHS found that spending on skin substitutes reached more than $10 billion in 2024 — more than 15% of the $66 billion in total spending for all Medicare Part B drugs that year, according to the HHS watchdog.

In response, a new rule adopted by Medicare is expected to reduce skin substitute payments by more than 90%. “This change is expected to exert downward pressure on Medicare spending for physicians and other professional providers who use these products in patient care. As a result, overall other professional services spending growth is expected to slow from 5.8% in 2025 to 2.0% in 2026,” Fiore and colleagues wrote.

They also projected that during the years 2029-2034, spending on physician care and other clinical services would average around 5.5% annually, a figure that is based on historical trends, according to co-author John Poisal, deputy director of the national health statistics group within the CMS Office of the Actuary.

“We oftentimes find ourselves, if there’s a lack of better information, looking to the history,” he told MedPage Today. “You drive a car by looking in the rearview mirror in a lot of ways to see where you’ve been and use that to help where you’re going.”

In contrast with the moderating trend later on, rates of growth in Medicaid physician and clinical services spending are projected to have accelerated from 4.2% in 2024 to 9.4% in 2025, according to the researchers. (Numbers for 2024 and 2025 are projections because even though those years have passed, it takes a while for researchers to do their analysis.) In addition, they wrote, “for medical goods, total Medicare prescription drug spending growth is projected to have remained elevated at 12.6% in 2025 (compared with 12.9% in 2024), as Medicare beneficiaries continued their high utilization of GLP-1s for various indications, coupled with increased prices of expensive oncology drugs used to treat certain types of cancers, including blood, renal, liver, and thyroid cancer.”