COVID-19 drove national health spending above $4T: A closer look

The COVID-19 pandemic drove national spending on healthcare to $4.1 trillion in 2020, a 9.7% increase, according to a recent report.

The Center for Medicare and Medicaid Services tallied up the spending figures in a Dec. 15 report published in Health Affairs. The worst public health crisis in a century drove the dramatic overall increase in spending on healthcare.

However, health spending in some areas didn’t necessarily see big increases, another ripple effect of the coronavirus pandemic. In fact, spending fell in some areas.

The financial figures in the coronavirus pandemic pale in comparison to the truly important numbers. More than 800,000 people have died due to COVID-19 and more than 50 million cases have been reported.

Still, the report on health spending in 2020 offers useful perspective on the pandemic. Here’s a quick rundown on some of the important and intriguing numbers.

Spending spike

National health spending rose by 9.7% in 2020, well above the 4.3% increase in 2019. It’s the largest one-year increase by percentage since 2002.

For some bigger perspective, national healthcare barely topped $3 trillion in 2014. And in 2020, health spending surpassed $4 trillion.

Bigger federal share

Federal spending on healthcare soared by 36% in 2020 (growth in 2019: 5.9% in 2019). The federal government directed much of that money to hospitals, doctors and long-term care facilities.

The federal government accounted for a larger share of all health spending (36% in 2020, compared to 29% in 2019).

Hospital struggles

Hospital spending rose to $1.3 trillion in 2020, a 6.4% increase. But that essentially mirrors the increase in 2019 (6.3%).

Hospitals received more aid from the federal government via COVID-19 relief programs, along with higher Medicaid spending for hospital care.

However, hospitals saw less revenue from private insurers. Private health insurance spending fell 6.6% in 2019 (compared to a 6.6% increase in 2019).

Hospitals endured shortages in critical supplies in 2020, and the federal report suggested that could have deterred some people from seeking care. Inpatient days fell by 4.7%, and discharges decreased by 9.8%.

Meanwhile, hospital prices rose by 3.2% in 2020, according to the Producer Price Index. Hospital prices increased 2% in 2019.

Less out-of-pocket spending

Out-of-pocket spending on healthcare actually declined in 2020. Really.

The report stated consumers’ out-of-pocket spending fell by 3.7% in 2020; it rose 4.3% in 2019.

While a drop in out-of-pocket spending may be surprising, some patients skipped going to the doctor or dentist during the pandemic, particularly in the initial months after the emergence of the coronavirus. Consumers were also less likely to go to the hospital, at least for non-COVID reasons.

Half of Americans delayed or skipped a healthcare service of some kind over the previous year, a Kaiser Family Foundation poll found.

Prescription spending slows

Spending on prescription drugs rose in 2020, but at a slower rate than the previous year.

Retail prescription drug spending increased by 3% in 2020, compared with a 4.3% increase in 2019. Again, some people opted against filling prescriptions, while some prices dropped, according to the report.

Roughly 3 out of 10 Americans surveyed said they didn't fill a prescription due to the cost, according to the KFF poll.

Doctors and clinical services

Spending for physician and clinical services rose to $809.5 billion in 2020, a 5.4% increase. For comparison, spending rose 4.2% in 2019. COVID-19 relief funds accounted for the bulk of the spending increase in 2020.

At the same time, Medicare and Medicaid spending growth slowed substantially. Medicare spending rose by only 0.5% in 2020, after rising 8,9% in 2019. The report stated the change reflects a drop in fee-for-service expenditures.

Medicaid spending also slowed, if not quite as dramatically. Medicaid expenditures rose 4% in 2020, following a 6.5% increase in 2019.

Private health insurance spending for physician and clinical services fell for the first time since 2013. Private insurer spending dropped 2.6% in 2020; it rose 2.6% in 2019.

Private insurance enrollment fell

In 2020, private health insurance enrollment fell by 1.7 million (0.8 percent). The number of people in employer-sponsored private plans fell by 2.3 million, but an additional 600,000 people enrolled in Marketplace plans.

Medicare, Medicaid rolls grew

After two years of declines, Medicaid enrollment spiked due to the pandemic.

An additional 3.7 million people enrolled in Medicaid in 2020, a 5.1% increase. Some applied for Medicaid after losing jobs in the pandemic, while the federal government offered more medical assistance for states that maintained Medicaid eligibility.

Medicare enrollment slowed slightly in 2020. The number of enrollees rose by 2.1% in 2020, compared to 2.6% in 2019.