Healthcare Cost CAGR Calculator: Annualized Health Spending Growth
Work out the annualized growth rate of healthcare costs between two years — the figure that exposes how much faster medical spending grows than general inflation, and how aggressively to plan for it in retirement.
Adjust the inputs and select Calculate for a full breakdown.
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | Annual healthcare cost growth | Total cost growth |
|---|---|---|
| $5k to $8k over 10yr | 4.81% | 60.00% |
| $3k to $6k over 8yr | 9.05% | 100.00% |
| $10k to $20k over 15yr | 4.73% | 100.00% |
| $2k to $2.5k over 5yr | 4.56% | 25.00% |
How This Calculator Works
Enter the starting and ending annual healthcare cost and the years between them. The calculator finds the compound annual growth rate that connects the two figures. Use the same scope on both sides (premiums only, or total spend including out-of-pocket) for a meaningful trend.
The Formula
Compound Annual Growth Rate
Start is the beginning value, End is the ending value, n is the number of years
Worked Example
Healthcare costs rising from $5,000 to $8,000 over 10 years is a 4.8% annual growth rate — total growth 60%. That's well above general inflation (typically 2% to 3% annual), which is why projecting current health spending forward at general inflation systematically understates the true cost in retirement.
Key Insight
Healthcare cost inflation has historically outpaced general inflation by 2 to 4 percentage points annually in the US. Projecting current spending at general inflation systematically underprojects future healthcare costs — Fidelity's widely cited retirement healthcare estimate (around $315,000 per couple in 2024) reflects this gap. Building a retirement plan against general-inflation healthcare projections is the most common medical-cost planning error.
Frequently Asked Questions
How is healthcare cost CAGR calculated?
Same formula as any compound annual growth rate. (ending / starting) ^ (1/years) − 1. From $5,000 to $8,000 over 10 years works out to about 4.8% per year.
How fast do US healthcare costs grow?
Long-run averages: 4% to 7% per year for total US healthcare spending, well above general inflation (2% to 3%). Premiums often grow faster than out-of-pocket; deductibles have grown fastest in recent years as plans shift more cost to consumers.
What scope should I use?
Total annual healthcare spend (premiums + out-of-pocket including deductibles, copays, and uncovered care) gives the truest picture. Premiums only often understates because out-of-pocket has grown faster than premiums in the deductible-shifting era.
Does this apply to Medicare?
Medicare premiums and out-of-pocket costs also grow faster than general inflation. Plan retirement healthcare against healthcare-cost growth, not general inflation. Fidelity, Schwab, and similar retirement calculators use a healthcare-specific inflation rate.
Can I lower the growth rate?
Mostly no on the macro level. At the personal level: switching plans annually, using HSAs aggressively (triple tax advantage), reviewing prescription costs annually, and choosing high-deductible plans paired with HSAs can reduce the growth rate of your specific spend.
Related Calculators
Data Sources & Benchmarks
This calculator draws on 1 independent, dated source.
Methodology & Review
The growth rate is the compound annual rate between healthcare costs at the start and end of the period. Use the same scope (premiums only, out-of-pocket only, or total spend including premiums + deductibles + copays) on both sides for a meaningful comparison.
Written by Ugo Candido · Last updated May 17, 2026.