The agency, which oversees Medicare plans for people aged 65 and older or with disabilities, said healthcare spending outpaced U.S. economic growth. It rose by an inflation-adjusted 4.4% compared with gross domestic product growth of 2.9% in 2023, the report said.

Spending on retail prescription drugs had the biggest increase, rising 11.4% to $449.7 billion after a 7.8% rise in 2022, largely due to the use of weight-loss and diabetes drugs, a CMS official said during a press briefing.

Within the Medicare prescription drug benefit, the amount spent on diabetes medicines like the popular newer GLP-1 medicines such as Novo Nordisk's (NOVOb.CO) Ozempic and Wegovy that are also used for weight loss, increased 35%, the official said.

"That significantly contributed to Medicare prescription drug spending growth of 12.2%," the official added.

Healthcare represented 17.6% of the U.S. economy in 2023, slightly up from 17.4% in 2022. That portion is slightly lower than at the height of the COVID-19 pandemic, the report said.

Spending for hospital care services totaled $1.5 trillion in 2023, rising by 10.4%, the highest growth in nearly three decades. Spending on clinical services increased 7.4%.

Commercial insurers represented the largest share of spending, jumping to 30% from 19.5% in 2022, due to increased enrollment in employer-sponsored health plans and greater enrollment in ACA plans, commonly referred to as Obamacare.

The 2021 American Rescue Plan Act and 2022 Inflation Reduction Act included enhanced subsidies that reduced the cost of premiums for people enrolled in Obamacare plans. Following introduction of those policies, 2.7 million additional people signed up for Obamacare plans in 2023.

Enrollment in private health insurance increased 1.6% in 2023, representing 3.3 million Americans, CMS said.

The report found that 92.5% of Americans were covered by some form of health insurance in 2023, up from 92.0% in 2022.