As the Covid-19 pandemic wore on last year, U.S. health care spending grew 2.7% to $4.3 trillion, or nearly $13,000 per person, according to a new analysis by Medicare actuaries published online in the journal Health Affairs. The increase was far smaller than the 10.3% jump seen in 2020, when the virus first exploded across the country, and the annual report highlights how health spending changed as the disruptive effects of the pandemic — and the massive emergency response — began to fade.
“Three key factors affected the spending trend in 2021, with the decline in federal government health care spending far outweighing greater use of health care goods and services and increased insurance coverage,” the report says.
Federal health care spending fell in 2021: After a 37% spike in federal health care spending fueled by the pandemic in 2020, government health care expenditures fell by 3.5% last year — to $1.46 trillion — as Covid-19 funding continued at lower levels. Federal spending on public health activity, for example, fell from about $136 billion in 2020 to $79 billion in 2021, a drop of more than 40%.
The use of medical goods and services grew: Health spending excluding emergency pandemic programs and federal public health efforts grew by 7.6% in 2021, compared with 2.3% the prior year, as Covid-19 vaccinations became widely available and medical care that had been put off due to the pandemic picked up again.
The health care sector shrank as a share of the economy: Health spending dropped from 19.7% of gross domestic product in 2020 to 18.3% in 2021, driven by broader growth in the economy, but health spending remained higher than the 17.6% share of GDP it represented in 2019, before the pandemic.
The number of uninsured fell again: As Medicaid enrollment swelled due to the pandemic and related federal restrictions preventing states from dropping people from their Medicaid rolls, the number of uninsured Americans fell for a second straight year, dropping from 31.2 million to 28.5 million. The portion of the population that has insurance Medicaid enrollment grew by 8.5 million, or 11.2%, the most since 2015. Medicare and private insurance enrollment also grew, by 1.7% and 0.3%, respectively.
Medicare and Medicaid spending jumped: Spending by the health care program for seniors topped $900 billion last year, up 8.4% compared with 3.6% growth in 2020. Medicare accounted for more than a fifth of total national health care spending. Medicaid spending increased 9.2% to $734 billion, or 17% of the national total, though on a per-enrollee basis spending fell by 1.8%. Overall, the federal government accounted for 34% of total health spending in 2021, down from 36% in 2020 but higher than the 29% for 2019.
Private health insurance spending, meanwhile, grew by 5.8% to reach $1.2 trillion, or 28% of total health expenditures. “Private health insurance enrollees increased their use of medical goods and services in 2021 in part because of pent-up demand for elective surgeries and procedures that were delayed or forgone in 2020,” the report says. Out-of-pocket spending rose by more than 10%, the fastest since 1985, to reach $433.2 billion.
Where the money went: Hospital spending rose by 4.4% to $1.3 trillion, representing 31% of total spending. Payments to doctors and other clinical services grew 5.6% to total nearly $865 billion, or 20% of total spending. As doctor visits rebounded last year, the number of new prescriptions jumped and retail prescription drug spending rose by about 8% to $378 billion, accounting for 9% of health outlays. “The mix of spending on drugs dispensed also contributed to increased expenditure growth, as spending for newly available, higher-price brand-name medications increased and less was spent on newly available generic medicines,” the report notes. Generics account for about nine of every 10 prescriptions dispensed, but only 16% of prescription drug spending, down from more than 20% in 2017.
