Our Take
Utilization growth, not unit cost, is the spending engine — which means volume controls (formulary restrictions, prior auth) will matter more than price negotiations alone.
Why it matters
Health plans and employers betting on price caps will miss the real lever. CMS data showing utilization-led spending spikes signal that utilization management and access policy will define 2025 budget outcomes, not price per unit.
Do this week
Benefits teams: audit your 2025 utilization forecasts against 2024 actuals by Friday so you can reweight formulary and prior-auth intensity before Q2 claims arrive.
US health spending climbed to $5.7 trillion in 2025
The Centers for Medicare and Medicaid Services (CMS) reported total US health spending of $5.7 trillion in 2025 (per the CMS announcement), with growth moderating from prior years. However, the composition of that growth reveals a structural shift: utilization—the volume of services, prescriptions, and procedures—is the primary driver, not inflation in unit prices.
Prescription drug spending is the sharpest example. GLP-1 medications (semaglutide, tirzepatide, and similar weight-loss and diabetes drugs) are accelerating drug expenditure faster than historical trends would predict. These drugs are widely adopted, increasingly covered by insurance, and used across expanding indications. The volume of GLP-1 fills is growing rapidly, adding material dollars to pharmacy budgets even as per-unit costs remain competitive.
Utilization, not price, is the budget constraint
The distinction matters because it inverts the logic of cost control. For the past decade, employer and plan focus has centered on price negotiation, reference pricing, and manufacturer rebate architecture. Those levers still apply, but they address a secondary variable. If people are using more drugs, more frequently, at stable or declining unit prices, then price-per-script negotiations yield diminishing returns.
Health plans and self-insured employers that modeled 2025 spend based on historical inflation rates will face variance from utilization surprises, particularly around GLP-1s and any other high-adoption-velocity drugs. CMS data showing utilization as the primary growth driver suggests that formulary design, step therapy, and prior-authorization intensity will be more consequential cost levers than contract discounts.
Build utilization forecasting into budget cycle
Benefits managers and plan sponsors should separate utilization growth from price growth in their 2025 variance analysis. Pull claims data by therapeutic class and compare per-capita fills, injections, or procedures month-to-month against baseline. For GLP-1 drugs specifically, track net new members on therapy, dosage patterns, and duration of therapy. That pattern will inform whether 2025 overspend is driven by new adoption (recurrent next year) or temporary uptake (likely to flatten).
Plans considering tighter GLP-1 access policies should model the utilization forecast under different restriction levels before implementing restrictions. If utilization is high and stable, access controls may be necessary; if uptake is still accelerating, controls may simply delay the inevitable and create provider friction. CMS's utilization-first narrative means plans without clear utilization data by drug class will struggle to justify mid-year budget corrections to CFOs and boards.