COVID-19 relief led to nearly 10% jump in 2020 health spending

U.S. healthcare spending rose 9.7% to $4.1 trillion last year, primarily due to federal COVID-19 relief spending, the actuaries at the Centers for Medicare and Medicaid Services reported Wednesday.

The jump marks the largest growth in health expenditures since 2002 and spending was more than 5% higher than during 2019. Much of the increase came from federal spending related to the COVID-19 pandemic, such as the Provider Relief Fund and Paycheck Protection Program loans, according to a report the CMS Office of the Actuary published in Health Affairs.

Health spending constituted 19.7% of gross domestic product. The spike in that share last year is the largest annual increase agency actuaries ever recorded, CMS statistician Micah Hartman said during a news briefing.

But when spending related to public health and related federal programs is excluded, national health expenditures grew only 1.9%, largely because many people cut back on healthcare utilization during the start of the pandemic.

Hospital, physician and prescription drug spending all increased. Hospital spending, which amounted to $1.3 trillion and 31% of all healthcare spending, saw similar growth to 2019. Last year, the increase was due entirely to supplemental federal funding related to the pandemic. While out-of-pocket spending on hospital care decreased 12.6%, prices increased 3.2%, compared to 2% in 2019, CMS found.

The Provider Relief Fund made up $121.6 billion of federal health expenses and Paycheck Protection Program loans accounted for $53.3 billion. Nearly $87 billion went to hospitals, with physicians and clinical services and nursing homes receiving an additional $51.5 billion and $20.1 billion, respectively.

Medicare spending growth slowed from 6.9% in 2019 to 3.5% in 2020. Medicare spending amounted to $829.5 billion, or 20% of national healthcare spending. Medicare enrollment slowed to 2%.

The rate of growth in Medicare spending was lower across provider types except nursing homes last year, whichtheCMSactuariesreportwastheconsequenceofpublichealthemergencywaiversthatremovedbarrierstonursinghomecare.

Medicaid expenditures accounted for 16% of total national health spending at $671.2 billion. The growth rate was roughly three times higher than the previous year’s, which the CMS actuaries attribute to more people joining the program. Medicaid enrollment increased by more than 9 million in 2020. Medicaid hospital spending increased 6.7%, partially due to supplemental payments to hospitals and other healthcare facilities.

Fewer people had employer-sponsored health insurance in 2020, leading to a 1.2% decrease in private payers’ share of total health expenditures. Private plan spending decreased by 2.4%.

Out-of-pocket spending also decreased 3.7%, the first decline since the Great Recession in 2009. Lower utilization and waived cost-sharing requirements for COVID-19 treatment and testing were factors, the actuaries report.

The uninsured rate declined slightly as 600,000 people gained coverage last year, Hartman said.


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