Health care spending hit its highest level in two decades, with the exception of one year during the COVID-19 pandemic, a trend that could be due to growth in the share of Americans who are insured.
According to an American Medical Association (AMA) policy report on health spending trends, health care spending grew by 7.5% in 2023, significantly above growth rates of 4.6% in 2022, 4.2% in 2021 and 4.4% in 2019.
In 2020, health care spending skyrocketed to 10.4% as COVID-19 emerged, but before that, the highest growth in health care spending came in 2003, when it reached 8.5%, said AMA.
The increase is notable because it marks the first time since the start of the pandemic that the growth in health care spending outpaced economic growth, measured by a 6.6% increase in gross domestic product, said the report.
“The rapid growth was primarily due to higher utilization of health care goods and services, along with high enrollment in private health insurance and Medicaid,” said the report.
Health insurance coverage is estimated to be at a historic high of 92.5%, said AMA.
Personal health care consumption made up the largest share of total health care spending in 2023 at 84.4%, while physician services encompassed 14.8% of total health care spending. Spending for physician and clinical services saw the fastest growth rates in 2023, rising by 7.6% and 7% respectively, compared with 4.9% and 3.8% growth the previous year.
“The faster growth is driven by increased utilization, as evidenced by the fact that — after adjusting for price changes — spending on hospital care, prescription drugs, and physician and clinical services all accelerated compared to the previous year,” said AMA economist Allen Hardiman.
Faster spending increases for hospital and physician services also boosted out-of-pocket spending, which rose by 7.2% in 2023.
“With more people insured, they’re able to access health care services, but that also means they incur additional costs like copays and deductibles, which contribute to the increase in out-of-pocket spending,” Hardiman said.