Each year, actuaries and economists from the Centers for Medicare and Medicaid Services (CMS) project future spending on health. CMS expects health spending to reach $6.0 trillion (18.7% of the economy) in 2026, with hospitals making up the largest share of spending ($1.9 trillion). By 2034, health spending is expected to hit $9.0 trillion, making up 20.6% of the economy.

Hospital spending is estimated to make up $2.7 trillion (30%) of total health spending in 2034. Physician and clinic spending, and retail prescription drug spending are also expected to grow between 2026 and 2034, reaching $1.9 trillion (21%) and $814 billion (9%), respectively.

Retail prescription drugs do not include drugs that are physician-administered in hospitals, physician offices, outpatient centers, long-term care facilities, and at home. Trends in physician-administered drug spending may differ from trends in spending on retail prescription drugs.

Growth in spending on hospitals, physician services, and retail prescription drugs is projected to slow in 2026

In 2026, hospital spending growth is expected to slow to a rate of 5.8% from an estimated 8.2% growth rate in 2025. Growth in total hospital spending is expected to remain stable from 2027-2034 at an average annual rate of 4.7%.

Total retail prescription drug spending growth is projected to slow to a rate of 8.2% in 2026 from an estimated 11.1% growth rate in 2025. From 2027-2034, growth is projected to decrease to an average annual rate of 4.8%.

Similarly, the annual change in total spending on physicians and clinics is expected to slow to 5.6% in 2026 from an estimated 6.2% growth rate in 2025. From 2027-2034, physician and clinical services spending growth is expected to moderate at an average annual rate of 5.4%.

Health spending is expected to grow slower after 2026

In 2026 the annual percent change in health spending growth is estimated to have slowed to 6.3%. Growth is expected to slow further by 2027 to 4.7%. From 2028-2034, health spending growth is projected to moderate at an average annual rate of 5.2%. During this period, national health spending growth is expected to outpace GDP growth, partly due to rising medical prices and utilization.

Several elements are expected to slow health spending growth in the coming years. First, CMS expects health utilization to moderate, including uptake of high-cost specialty drugs. Second, CMS projects the number of uninsured people will increase as a result of the Medicaid community engagement and eligibility requirements included in the 2025 budget reconciliation law and the expiration of the ACA Marketplace enhanced premium tax credits in 2025. There are different federal estimates of how many people will lose coverage as a result of these policies. Still, these changes are expected to put downward pressure on Medicaid and private health insurance spending growth. People who are uninsured are less likely to use healthcare than people with health insurance, slowing overall health spending growth as well. Finally, the Inflation Reduction Act’s (IRA) Medicare prescription drug provisions related to drug price negotiation and inflation rebates are expected to slow Medicare prescription drug spending growth over the longer term, although higher rates of Medicare spending growth are projected in the near term.

Health spending is projected to account for over one-fifth of the U.S. economy in 2034

Health spending is estimated to have grown slightly quicker than the economy in 2026 and to have increased to 18.7% of GDP. Health spending growth is expected to outpace growth in the overall economy and eventually hit 20.6% of GDP by 2034.

Per capita retail prescription drug spending growth is projected to average 4.5% annually between 2027 and 2034

Per capita retail prescription drug spending growth is expected to average 4.5% between 2027 and 2034, lower than the estimated 10.3% growth rate in 2025 and 8.1% growth rate in 2026. The annual growth rate for per capita retail prescription drug is expected to have been high in 2025 and 2026 due, in part, to increased utilization of high-cost retail prescription drugs.

CMS projects growth in per capita retail prescription drug spending to slow between 2029 and 2034, in part due to an anticipated moderation of GLP-1 utilization among Medicare enrollees and the long-term effects of many of the IRA Medicare drug provisions, including negotiated drug prices and the Medicare inflation rebate. However, there is considerable uncertainty in projected prescription drug spending due to the potential introduction of new drugs, especially for diabetes, cancer, and autoimmune diseases.

Per capita out-of-pocket spending growth is expected to fall to lower levels beginning in 2027

Per capita out-of-pocket spending growth is expected to have risen from 4.9% in 2024 to 6.1% in 2026. This acceleration was driven in part by increased utilization of diabetes and weight loss prescription drugs that can have high cost-sharing or are paid for completely by the consumer without insurance.

After somewhat volatile growth during the early 2020s, CMS projects annual per-capita out-of-pocket spending growth will decline to an average of 4.1% between 2027 and 2034. The IRA’s Medicare prescription drug provisions, such as the elimination of the 5% coinsurance component for catastrophic coverage in 2024, the Part D out-of-pocket spending cap for Medicare beneficiaries (initially set at $2,000 in 2025), and negotiated drug pricing, are expected to put downward pressure on average out-of-pocket spending growth for Medicare enrollees.

Growth in private insurance per enrollee spending is expected to spike in 2026, then drop below Medicare per enrollee spending growth by 2027

In the private insurance market, per enrollee spending growth is expected to have accelerated from 5.2% in 2024 to 8.2% in 2026. This spending growth is partly attributed to higher per enrollee spending on prescription drugs and hospitals as well as the projected exit of younger, healthier enrollees from the ACA Marketplaces following the expiration of the enhanced premium tax credits at the end of 2025. Per enrollee private insurance spending growth is expected to drop to 4.6% in 2027 and remain between 4.0% and 4.9% from 2027 through 2034.

Growth in per enrollee Medicare spending is expected to rise from 5.4% in 2024 to 6.9% in 2026 before slowing to 5.9% in 2027. From 2027-2034, per enrollee growth is expected to range between 5.4% and 6.5%. CMS expects some of the IRA drug provisions may slow Medicare spending growth in the long term, while other provisions may accelerate spending growth. One provision projected to increase Medicare spending growth is the Medicare Part D out-of-pocket spending cap, initially set at $2,000 for 2025, which will transfer some prescription drug spending from enrollees to the Medicare program (and Part D plans) as drug prices and utilization grow. A second provision with longer-term impact is Medicare drug price negotiation, which CMS expects will increase Medicare spending growth initially by replacing plan-negotiated rebates with Medicare negotiated prices at the point of sale, before eventually slowing Medicare prescription drug spending growth from 2029-2034.

Recent policy changes have affected per enrollee Medicaid spending. With Medicaid unwinding, per enrollee Medicaid spending grew by 16.6% in 2024 as younger and healthier Medicaid enrollees were more likely to disenroll from the program. Annual Medicaid per-enrollee spending growth is projected to have dropped sharply from 12.6% in 2025 to 5.1% in 2026 as CMS expects slower Medicaid spending growth and a smaller Medicaid enrollment decline in 2026. Per enrollee Medicaid spending growth is expected to average 4.5% annually between 2027 and 2034. CMS expects the Medicaid provisions of the 2025 budget reconciliation law, including caps on state directed payments,  restrictions on Medicaid provider taxes, and new community engagement and eligibility requirements, to limit growth in Medicaid spending and enrollment over the next few years.

Across all services, out-of-pocket spending per capita is expected to continue increasing

Per capita out-of-pocket spending is expected to increase across hospital services, physician and clinical services, and retail prescription drugs through 2034, though not as much as total spending. Between 2026 and 2034, out-of-pocket hospital services spending per capita is projected to increase at an average rate of 3.6% per year, reaching a high of $178 out-of-pocket per capita by 2034 – a 31.9% increase from 2026.

Out-of-pocket physician and clinical services spending per capita is expected to increase at an average rate of 4.4% annually between 2026 and 2034. In 2026, physician and clinical services out-of-pocket spending is estimated to be $307 per capita and is expected to increase to $427 by 2034.

CMS expects out-of-pocket retail prescription drug spending per capita to increase at an average rate of 3.5% per capita from 2026-2034. Retail prescription drug out-of-pocket spending is projected to be $229 per capita in 2034, up from $174 in 2026.

Per capita spending is expected to increase by 5% annually on average between 2025 and 2034

CMS projects healthcare spending considering demographic and utilization patterns, but there is significant uncertainty around spending estimates. Innovations in healthcare, including artificial intelligence and high-cost specialty drugs and therapies, may have significant, but uncertain, effects on health spending and outcomes. Volatile economic conditions, such as changing health employment and periods of inflation, can also impact the cost of health services. Additionally, the ongoing implementation of legislative changes to the Medicaid and ACA insurance markets can also make estimating health spending difficult. Forecasts rely on assumptions about the future of healthcare, and even small differences in growth rates can add up to large spending differences over time.

Per capita health expenditures are projected to grow from $16,486 in 2025 to $25,513 in 2034, which is an average annual growth rate of 5.0%. If growth rates end up being 1 percentage point lower each year over that same period, per capita spending would be over $2,000 lower than expected in 2034. If growth rates end up being 1 percentage point higher each year, spending would rise to $28,046 per person in 2034 (about $2,500 per capita higher than expected).

Health spending projections for 2034 are 18% below what would be expected based on CMS’ 2010 projections

Extending projected health spending rates from the past illustrates that health spending is growing slower than was previously predicted. Health spending in 2034 is now expected to be nearly $2.0 trillion less than what would be expected based on CMS’ 2010 projections and nearly $550 billion less than what would be expected based on 2015 projections. The difference in these estimations is partially due to a slowdown in health expenditure growth at the end of the 2010s.

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