U.S. health spending reached $5.3 trillion in 2024—nearly 18% of the nation’s GDP—and is projected to keep climbing. But where is all that money going? A staggering 40% of the increase in national health expenditures between 2022 and 2024 was driven by hospital care alone, totaling $277 billion.
Hospital Costs: The Biggest Driver of Rising Healthcare Bills
A new analysis reveals hospitals accounted for the largest share of healthcare spending increases over the past two years, and a substantial portion over the last two decades.
- National health expenditures increased by $692 billion between 2022 and 2024.
- Hospital care accounted for $277 billion of that increase—40% of the total.
- Hospital spending grew at a faster rate (20%) than total health spending (15%) during the same period.
- Over the past two decades (2005-2024), hospital spending accounted for 32% of the overall increase in national health spending.
Between 2022 and 2024, national health expenditures jumped $692 billion, from $4.6 trillion to $5.3 trillion. During this period, hospital care accounted for $277 billion of that growth—a full 40% of the total increase (Figure 1). Hospital spending represented nearly a third of all national health expenditures in 2022 (30%) and outpaced overall health spending growth in both 2023 (10.6% versus 7.4%) and 2024 (8.9% versus 7.2%).
The Centers for Medicare & Medicaid Services (CMS) attributes the surge in hospital spending in 2023 and 2024 to a “rebound in nonprice factors, such as the use and intensity of services, that were somewhat depressed during the COVID-19 public health emergency.” However, rising hospital prices—up 2.7% in 2023 and 3.4% in 2024—also played a significant role. In fact, 2024 saw the fastest hospital price growth since 2007, encompassing prices paid by Medicare, Medicaid, and commercial insurers, though prices in public programs have historically grown more slowly than commercial rates.
Other major spending categories paled in comparison. Physician and clinical services accounted for 22% of the overall spending growth, while retail prescription drug spending—growing at a similar rate to hospitals—contributed 11% (Appendix Table 1). Smaller shares were attributed to non-medical insurance expenditures, other professional services, home health care, nursing care, dental services, and government administration. Notably, government public health activities decreased by 7% during this period, likely due to the winding down of pandemic-related initiatives.
From 2022 to 2024, hospital spending increased 20%, exceeding the 15% growth in total health spending. Retail prescription drugs (20%), other professional services (25%), home health care (23%), and government administration (24%) also grew rapidly, but their smaller overall base meant they contributed less to the total increase.
Looking back further, from 2005 to 2024, hospital spending accounted for 32% of the overall increase in national health spending, followed by physician and clinical services (22%) and retail prescription drugs (8%) (Appendix Table 2). CMS projects that hospitals will account for a similar 32% share of spending growth through 2033, down from the recent 40%.
A Trillion-Dollar Increase Over Two Decades
Hospital spending has ballooned from $609 billion in 2005 to $1.6 trillion in 2024—a $1.0 trillion increase (Figure 2). Over the same period, total health spending grew by $3.3 trillion, from $2.0 trillion to $5.3 trillion. More recently, hospital spending rose from $1.4 trillion in 2022 to $1.6 trillion in 2024, adding another $277 billion.
This growth in hospital spending over the past two decades outpaced increases in physician and clinical services, and significantly exceeded the growth in retail prescription drugs.
Both hospital spending and overall national health expenditures have consistently outpaced economic growth. Hospital spending rose from 4.7% to 5.6% of GDP between 2005 and 2024, while total healthcare spending increased from 15.5% to 18.0% of GDP. CMS projects that hospital spending will reach 6.4% of GDP and total health expenditures will climb to 20.3% of GDP by 2033.
The increase in hospital spending over the past two decades is driven by both rising prices and increased volume of services, particularly outpatient care. From 2005 to 2024, hospital prices increased by 61%, according to KFF analysis of the Producer Price Index. While total hospital inpatient days decreased by 5% (17% per 1,000 population), outpatient visits surged by 44% (25% per 1,000 population). This continued growth in hospital spending will likely contribute to higher costs for public programs like Medicare and Medicaid, employers, families, and exacerbate existing concerns about healthcare affordability.
This work was supported in part by Arnold Ventures. KFF maintains full editorial control over all of its policy analysis, polling, and journalism activities.
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