March 3, 2024

Healthcare spending growth less than half of 2020 COVID-19 numbers 

In 2022, healthcare spending in the United States increased 4.1% to $4.5 trillion, or $13,493 per person, according to new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services.

This was much slower than the growth in the nominal gross domestic product, which increased 9.1%.

Federal COVID-19 supplemental funding to the health sector through the Provider Relief Fund and the Paycheck Protection Program was highest during the initial year of the pandemic. It continued to affect healthcare expenditures in 2021 and 2022, although at reduced levels. 

Funding to the health sector through these programs was $174.6 billion in 2020, but just $2 billion in 2022, the report said.

In 2022, strong growth in Medicaid and private health insurance spending was offset by the continued declines in federal supplemental COVID-19 funding. 

Overall, healthcare spending growth in 2022 was faster than the 3.2% growth in 2021, but much slower than the rate of 10.6% in 2020.

Hospital spending (2.2% growth) reached $1.4 trillion in 2022, representing 30% of overall healthcare spending. 

Growth in expenditures for hospital care was 2.2% in 2022, lower than the 4.5% growth in 2021. The slower growth in 2022 reflected a decrease in hospital care spending by private health insurance, Medicare and Medicare, and by a decline in other private revenues.

Physician and clinical services spending (2.7% growth) reached $884.9 billion, or 20% of total healthcare expenditures in 2022. Spending growth increased 2.7% in 2022, the slowest rate of growth in almost a decade and lower than the increases of 5.3% in 2021 and 6.6% in 2020. 

This slower growth is due to a slowdown in the use of services and slower growth in prices. Spending for independently billing laboratories slowed in 2022 because of reduced COVID-19-related testing.

WHY THIS MATTERS

The report’s numbers reflect spending and utilization during the COVID-19 pandemic, with growth now returning to a more normal range.

This study will also appear in the January 2024 issue of Health Affairs. 

“Health care expenditures since 2020 have reflected volatile patterns associated with the COVID-19 pandemic and the federal government’s response to the public health emergency,” said Micah Hartman, a statistician in the CMS Office of the Actuary and first author of the Health Affairs article. “The growth in healthcare spending in 2022 of 4.1% was more consistent with the pre-pandemic average annual growth rate of 4.4% over 2016–19. It remains to be seen how future healthcare spending trends will materialize, as trends are expected to be driven more by health-specific factors such as medical-specific price inflation, the utilization and intensity of medical care, and the demographic impacts associated with the continuing enrollment of the baby boomers in Medicare.”

THE LARGER TREND

Some of the report’s major findings show:

U.S. healthcare spending grew 4.1% to reach $4.5 trillion in 2022, faster than the increase of 3.2% in 2021, but much slower than the rate of 10.6% in 2020. The growth in 2022 reflected strong growth in Medicaid and private health insurance spending that was somewhat offset by continued declines in supplemental funding by the federal government associated with the COVID-19 pandemic. 

In 2022, the insured share of the population reached 92% (a historic high). Private health insurance enrollment increased by 2.9 million individuals, and Medicaid enrollment increased by 6.1 million individuals. 

In 2022, 26.6 million individuals were uninsured, down from 28.5 million in 2021 (a difference of 1.9 million individuals).

Gross domestic product continued to increase at strong rates of growth in both 2021 and 2022, increasing 10.7% and 9.1%, respectively. With a lower rate of healthcare spending growth of 4.1% in 2022, the share of GDP devoted to healthcare fell to 17.3% in 2022, lower than both the 18.2% share in 2021 and the highest share in the history of the National Health Expenditure Accounts, 19.5% in 2020. During 2016-19 the average share was 17.5%.

Growth in total healthcare spending in 2022 reflected a slowdown in personal healthcare spending for hospital care (from 4.5% in 2021 to 2.2% in 2022), dental services (from 18.2% in 2021 to 0.3% in 2022), and physician and clinical services (from 5.3% in 2021 to 2.7% in 2022). 

This decrease was more than offset by faster growth in non–personal healthcare spending, which accelerated in 2022 due largely to a turnaround in the net cost of insurance, according to the report.

Medicaid and private health insurance spending also influenced growth in healthcare spending in 2022. Medicaid spending increased 9.6% in 2022 after growth of 9.4% in 2021 and 9.3% in 2020. 

From 2019 to 2022, cumulative Medicaid spending increased 31%, or 9.4% per year on average, and enrollment accounted for most of the growth as it increased 24.6%. 

Medicaid enrollment increased by 6.1 million people in 2022. During the COVID-19 pandemic, individuals retained Medicaid coverage until the redetermination process began this April.

Private health insurance spending increased 5.9% in 2022 after an increase of 6.3% in 2021 and a decline of 0.8% in 2020.

The number of uninsured individuals declined for the third consecutive year, from 28.5 million in 2021 to 26.6 million in 2022, as the insured share of the population increased to 92%, a historic high.

Marketplace enrollment increased by 1.7 million people in 2022, and employer-sponsored insurance enrollment increased by 1.5 million people, accounting for 86% of total private health insurance enrollment and 88% of spending. 

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