Rise in health care demands proves challenging for the labor supply
U.S. health care spending climbed 7.2% in 2024 to $5.3 trillion, according to new data from the Centers for Medicare & Medicaid Services, underscoring the industry’s rapid growth as providers contend with persistent labor shortages. The acceleration in utilization pushed health care’s share of the economy to 18% last year, up from 17.7% in 2023.
The surge was driven largely by nonprice factors, including higher demand for services and shifts in the mix of care consumed. Personal health care spending rose an average of 8.9% over the past two years. Looking ahead, CMS expects spending to reach $5.6 trillion in 2025, a 7.1% increase, and climb to $8.6 trillion by 2033, when health care is projected to make up 20.3% of GDP.
Even as demand accelerates, the labor supply continues to lag. The health care industry employed roughly 20 million workers in 2025, up from about 18 million in 2014, but growth has moderated to an annual rate of 2.4% and is projected to slow to less than 1% a year through 2034. That gap raises mounting concerns about providers’ ability to staff physicians, nurses and support roles fast enough to meet rising patient volumes.
Many providers are turning to artificial intelligence to ease the pressure. Health care AI is expected to soar from $20 billion in 2024 to nearly $500 billion by 2033, buoyed by rapid rate. Early trials have shown meaningful productivity gains, with a study finding personal AI assistance saving 43 minutes per day and specifically hospital radiology departments reporting an ROI of 451% over a five-year period.
Still, AI alone won’t fully offset the widening imbalance between demand and workforce supply. Technology is poised to amplify productivity, but not eliminate the structural labor shortfall that continues to shape the sector’s outlook.
The model assumes labor demand will rise 5%, based on 6% average spending growth with productivity gains, 75% AI adoption throughout the industry, and a 20% productivity gain, leaving a projected workforce gap by 2034.
The takeaway
Despite the breadth of solutions available, the reality is that even under optimistic assumptions—a 5% rise in labor needs, strong AI adoption and meaningful productivity gains—the workforce gap widens materially by 2034. Health systems cannot rely on any single lever to close it. The organizations that will emerge strongest are those that act now, moving decisively on workforce strategy, automation, care‑delivery redesign and financial restructuring.
Meeting future demand will require operating models that deliver more care with fewer people, supported by technology, disciplined operations and a focused service portfolio. Providers that invest early, prioritize execution and reimagine how work gets done will be the ones capable of sustaining quality, access and financial stability in an environment where labor constraints are no longer cyclical but structural.
Learn more about what’s happening in health care in our industry outlook.
