Health care costs predicted to exceed $8 trillion by 2033
July 2, 2025
Summary: The CMS Office of the Actuary has projected that health care costs will continue to increase at a rate higher than the growth of the gross domestic product, and will exceed 20% of the GDP by 2033.
Source Keehan, Health Affairs, June 25, 2025
The Centers for Medicare and Medicaid Services (CMS) Office of the Actuary released its projections of public, private, and total health care spending through 2032 last week in Health Affairs. They project an increase in annual cost of private health spending (which includes both employer-sponsored and individually purchased plans) of 7.6% (2025), 3.9% (2026-7) and 4.3% (2028-33).
The chart below summarizes the amount projected to be spent per person in total and by private payers:
Source Keehan, Health Affairs, June 25, 2025
Private health services are estimated to cost $4,778 in 2025, and to rise to $7,294 in 2022. Total health care expenditures are now 17.6% of the gross domestic product (GDP), and are estimated to reach 20.3% of GDP in 2033.
The Office of the Actuary expects pharmaceutical costs to grow only 5.1% annually for private health insurance, and 4.3% in Medicare, in part because they project only a modest number of new drug approvals in the 2027-2032 time period.
Implications for employers:
Medical expenses are expected to continue to rise at a higher rate than inflation and the increase in gross domestic product.
Medical expenses for private plans are expected to rise at a faster rate than those of Medicare or Medicaid, although aggregate cost of these government programs is sensitive to demographic shifts (Medicare) and government enrollment criteria (Medicaid)
This actuarial report does not consider the changes that could arise from the reconciliation budget bill currently being debated in Congress.
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July 2, 2025: Note that headline is corrected - initially said 2023! Thanks to Jeff Dobro, MD for picking up my error