Challenges remain, as U.S. health systems are facing a ‘financial trifecta,’ according to Kaufman Hall’s 2025 Health System Performance Outlook.
The U.S. health care industry closed the year with strong growth, even as mounting challenges continued to pressure profit margins across the sector, particularly for providers.
National health expenditures are projected to increase by 7.1 percent in 2025, slightly below the estimated 8.2 percent growth rate in 2024, according to a report by the Centers for Medicare and Medicaid Services. Spending growth is expected to moderate further to 5.6 percent in 2026, still well above the nation’s long-term gross domestic product (GDP) growth rate.
Spending and Cost
Health care spending, which now accounts for nearly 20 percent of the U.S. GDP, has shown notable resilience, reflecting sustained growth in health care goods and services, driven by a combination of demand- and supply-side factors.
On the demand side, demographic shifts remain a central driver. An aging baby boomer population continues to increase utilization of health care services, with much of that care financed through government programs and private insurance premiums.
According to the Census Bureau, the share of older Americans rose between 2010 and 2020 to its highest level since 1880–1890, with roughly 1 in 6 people now aged 65 or older.
The agency also projects that by 2030, all baby boomers will be 65 or older, reinforcing long-term demand for medical services.
At the same time, health insurance premiums have risen sharply. A Rice University study reports that from 1999 to 2024, the average worker’s contribution to family health insurance premiums grew by 308 percent, while total premiums rose by 342 percent. Those increases far outpaced growth in worker earnings and were nearly five times the rate of inflation over the same period.
On the supply side, innovation continues to reshape care delivery, particularly through the adoption of precision medicine. This personalized approach customizes treatments based on a patient’s genetic, environmental, and lifestyle characteristics.
Some hospitals are already integrating these technologies into their operations, turning into “smart hospitals.”
