Healthcare is 18% of U.S. GDP. Food accounts for about 9%. Energy accounts for approximately 5%. Construction and computers/software account for about 4% each. Defense is under 3%. Healthcare is not just another big industry. It has become a very large claim on the productive capacity of the American economy.”And the trajectory should matter to everyone—patients, employers, taxpayers, health care executives and policy makers.
According to CMS National Health Expenditure data, Americans spent $5.3 trillion on healthcare in 2024, which is $15,474 per person in the country. Spending rose 7.2% in a single year and reached 18.0% of GDP.
The figure looks even more striking internationally. The Commonwealth Fund reported in 2024 that the United States spent nearly double the average percentage of GDP on health care as other OECD countries. U.S. per capita healthcare spending was also 1.5 times that of Switzerland, the second-highest-spending country in its comparison.
It’s not that Americans don’t value healthcare. The question is how long the economy can keep absorbing healthcare costs at this level. “We don’t have a problem with drug costs. We have a problem with healthcare costs. The usual health care discussion quickly turns to drug prices. Prescription drugs certainly warrant scrutiny. But focusing on drugs alone risks missing where the dollars are really spent.
In 2024:
Hospital care: $1.635 trillion
Physician and clinical services $1.110 trillion
Medications: $467 billion
Hospital care costs rose 8.9 percent in one year. Spending on physician and clinical services was up 8.1%. Prescription drug spending increased 7.9%.
No single villain can explain a $5.3 trillion system.
The problem is the system itself: prices, utilization, administrative complexity, aging, chronic disease, labor costs, expensive technology, fragmented incentives, and the payment structure where the people who consume, prescribe, provide, and pay for healthcare often have very different economic incentives.
And the bill just keeps getting bigger. The long-term problem is especially impossible to ignore now that the federal numbers are out.
CBO now says federal subsidies for health insurance will total an extraordinary $33.6 trillion from 2026 to 2036. Annual subsidies are expected to grow from $2.4 trillion in 2026 to $3.9 trillion in 2036, or from 7.4% to 8.4% of GDP. Medicare alone makes up $16.1 trillion of the total over 11 years.
That’s not just a Washington issue.
Ultimately, employers pay for it through insurance premiums and compensation decisions. Employees feel it in premiums, deductibles, and cost sharing. They experience it at the pharmacy, the doctor’s office. Taxpayers fund Medicare and Medicaid. Labor and operating costs are a challenge for hospitals.”
We all pay for the same system through different doors. Benefit cuts are not the same as fixing health care. There is a big difference here.
Reducing government spending on health care may improve the look of a budget spreadsheet, but it does not necessarily reduce the underlying cost of providing health care. Costs are easily passed on from government to employers, insurers, families, or providers.
Likewise, expanding insurance coverage doesn’t necessarily address the underlying cost structure. The harder challenge is to make healthcare itself more productive: to get better results for every dollar we spend.
It means asking uncomfortable questions across the healthcare economy.
Why does care cost so much more depending on where it is delivered? Why is healthcare administration so complicated? Which procedures and tests actually make a difference? Can we deliver more care outside of hospitals, in lower-cost settings? Is technology and AI the answer to reduce administrative labor instead of adding to the expense? Can reimbursement reward outcomes better than volume? Can we treat chronic diseases earlier, before patients become extraordinarily expensive?
And maybe most importantly: Who has a financial interest in reducing the size of the overall health care system? That’s probably the hardest question of all.
Hospitals want to increase revenues. Pharmaceutical companies want their revenues to grow. Insurers want enrollment and profitable premiums. Doctor groups need money. Technology companies want healthcare to purchase technology.
People talk about cutting healthcare costs.
Almost everyone also has healthcare spending as a revenue source. Eventually something has to give. A health care economy that is 18% of GDP doesn’t blow itself up when it hits a preordained mathematical ceiling. The United States can afford to spend a huge portion of its wealth on health care.
But the opportunity comes at a cost.
Every dollar spent on healthcare is a dollar that cannot be spent on wages, education, housing, infrastructure, investment, defense, retirement, or other priorities. And current projections don’t suggest that pressure is going away.
So the healthcare debate needs to move beyond the arguments about who should pick up the tab. We have to start having a much more serious conversation about why the bill is so large in the first place.
America does not need lower premiums for a healthcare system whose underlying costs are spiraling out of control.
It needs a more effective healthcare system.
Healthcare is no longer just a healthcare issue because it’s $5.3 trillion, $15,474 per person, and 18% of the entire economy. It’s a matter of economic competitiveness.
