Impact of COVID-19 Seen in 2021 National Health Care Expenditures Report

The combined effect of more health care use in 2021 and a decline in federal spending had an impact on US health expenditures in 2021, according to an analysis released Thursday.

The CMS analysis, published in Health Affairs, showed that US health care spending rose 2.7% to $4.3 trillion in 2021, much slower than the 10.3% jump in 2020, when the pandemic began.

However, when excluding other federal spending for both years, health spending growth was 2.3% in 2020 and a much-larger 7.6% in 2021, which highlights the spending trends on medical goods and services, as demand for care, delayed in 2020, started to return.

In 2021, there was a 3.5% drop in federal spending after a 36.8% hike in 2020, reflecting the impacts of the COVID-19 Provider Relief Fund and Paycheck Protection Program loans, as well as other federal public health activity in both years.

The health sector portion of US gross domestic product (GDP) fell from 19.7% in 2020 to 18.3% in 2021. In 2019, health sector spending was 17.6%.

For 2020 and 2021 combined, health care expenditures increased at an average rate of 6.4%, which is higher than the average growth of 4.1% during 2009 to 2019.

The annual report showed these trends in major goods and services:

Prescription drugs: Retail prescription drug spending was 9% of total health care spending in 2021, reaching $378.0 billion in 2021, and increasing 7.8% over 2020; the report said the faster growth (in 2020, it was 3.7%) was a result of the rebound in people seeking medical care after the COVID-19 surge in 2020. By category, the report said “spending for newly available, higher-price brand-name medications increased and less was spent on newly available generic medicines.”

Physician and clinical services: Spending rose 5.6% to $864.6 billion; this category made up 20% of total health care spending. In 2020, spending rose

6.6%.

Insurance trends: Last year, the number of uninsured people fell for the second year in a row as Medicaid enrollment increased. The number of uninsured individuals fell by 2.7 million. Medicaid enrollment increased by 8.5 million and Marketplace enrollment increased by 1.4 million, outweighing a 0.4 million reduction in employer-sponsored insurance enrollment. Medicaid spending accounted for 17% of total health care spending in 2021, reaching $734.0 billion.

While the authors of the analysis said they cannot make future projections, they noted that there remains “substantial uncertainty” of how COVID-19 will evolve, which could still affect future spending trends.

Reference

Martin AB, Hartman M, Benson J, Catlin A, the National Expenditure Accounts Team. National health care spending in 2021: decline in federal spending outweighs greater use of health care. Health Aff (Millwood). 2023; (42)1. doi:10.1377/hlthaff.2022.01397