US healthcare spending hits record $4.9 trillion driven by insurance growth and rising costs

The Health Care Affordability Board meeting held on February 20, 2025, focused on the significant trends in healthcare spending and insurance coverage in California. The meeting began with a review of the 2023 healthcare spending statistics, which reached an unprecedented $4.9 trillion, averaging $14,570 per person. This marked a 7% increase in per capita spending, a notable rise compared to the previous years' growth rates of 4.2% in 2022 and 4% in 2021.

Key contributors to this spending growth included the Net Cost of Private Health Insurance, which encompasses administrative expenses, taxes, and fees, and saw a substantial increase of 12.5%. Medicare spending also rose by 5.9%, reaching approximately $15,800 per person, driven by higher enrollment in Medicare Advantage and increased spending on hospital and prescription drug services. Medicaid spending experienced a sharper increase of 7.1%, rebounding from a mere 2.1% growth in 2022.

The meeting highlighted that the overall insured rate in California reached a record high of 92.5%, the highest in six years, attributed to strong enrollment in both private insurance and Medicare. However, the growth in spending was not solely due to expanded coverage; increased utilization of services and rising healthcare prices, which grew by 3%, also played a significant role.

The breakdown of spending categories revealed that hospital care, accounting for 31% of total healthcare spending, grew at an impressive rate of 10.4%, marking the fastest growth since 1990. Physician and clinical services increased by 7.4%, while prescription drug spending rose by 11.4%.

Overall, the discussions underscored the challenges of balancing access to care with affordability in the face of accelerated healthcare spending growth. The board reiterated its commitment to addressing these issues as part of its ongoing responsibilities. The meeting concluded with a reminder of the board's decision-making authority regarding healthcare affordability in California.