Health spending grew by 2.7% in 2021, reaching $4.3 trillion, according to new data from the Centers for Medicare & Medicaid Services (CMS).
CMS' annual National Health Expenditures report, released late Wednesday in Health Affairs, shows health spending grew at a much slower rate last year than in 2020, where health spending increased by 10.7%. The authors wrote that this decrease is likely due to far lower federal healthcare spending, which spiked in 2020 thanks to the COVID-19 pandemic.
The CMS analysts said federal health expenditures decreased by 3.5% in 2021 as funding for the COVID-19 response slowed.
In addition, while the height of the pandemic did lead many people to avoid healthcare to prevent exposure to the virus, the costs associated with treating COVID-19 were quite high, so that also drove up spending, according to the study.
"In the near term, the severity of the COVID-19 pandemic and its impacts on health care spending trends are expected to lessen while at the same time, federal COVID-19 funding continues to unwind and utilization trends stabilize," the authors wrote. "However, there is still substantial uncertainty associated with this disease, which could have significant effects on future health care spending trends."
Heathcare's share of the economy also decreased in 2021, accounting for 18.3% of the country's total gross domestic product. In 2020, healthcare represented 19.7% of the U.S. GDP.
The analysis breaks down spending among major payer categories as well as major expenditure categories. For private health insurers, which account for 28% of healthcare expenditures, spending rose by 5.8% in 2021, reaching $1.2 trillion. This is largely driven by a return to healthcare utilization levels on par with pre-pandemic data and continued growth in enrollment.
The CMS analysts noted that the uninsured rate decreased for the second year in a row in 2021.
Spending in Medicare, which accounts for 21% of total healthcare spend, increased by 8.4% to reach $900.8 billion last year. Spending in traditional, fee-for-service Medicare increased by 3.9% while spending in private Medicare plans increased by 14.1%. Spending in Medicaid, a 17% share of the pie, grew by 9.2% to reach $734 billion.
Out-of-pocket spending increased by 10.4% following a 2.6% decrease in 2020, according to the report.
Spending on hospital care, the largest chunk of expenditures at 31%, increase by 4.4% to reach $1.3 trillion. This growth rate, however, was slower than in 2020 at the height of the pandemic, the analysts at CMS said. Spending growth also slowed for physician and clinical services, increasing by 5.6% in 2021 compared to 6.6% in 2020.
Spending in the third largest category, prescription drugs, grew by 7.8%, a notably higher rate than in 2020 when spending on prescriptions increased by 3.7%, CMS said.
During a briefing with reporters Wednesday, the study's authors emphasized that the report is not designed to make predictions about the future. They did note in the study, however, that the pandemic's effects continue to impact the industry and that the inflation felt this year will likely play a role in future analyses.
"Also uncertain is the impact that recent economic trends may have on the health sector, as overall economic output declined in the first half of 2022 and grew at a slow rate in the third quarter, and during the summer of 2022, economywide inflation reached its highest level in nearly forty years," the analysts wrote.