Trends in health care spending

UPDATED . 5 MIN READ

Health spending in the U.S. increased by 2.7% in 2021 to $4.3 trillion or $12,914 per capita. This growth rate is substantially lower than 2020 (10.3% percent). This substantial deceleration in spending can be attributed to the decline in pandemic-related government expenditures offsetting increased utilization of medical goods and services that rebounded due to delayed care and pent-up demand from 2020.

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Overall, health spending was 18.3% of GDP in 2021 compared with 19.7% of GDP in 2020.

A new AMA Policy Research Perspective provides an in-depth look at U.S. health spending in 2021.

Policy Research Perspectives: National Health Expenditures, 2021: Decline in pandemic-related government spending results in 8-percentage point decrease in total spending growth (PDF)

The United States spent $4,255.1 billion on health care in 2021.

2021 Health care spending: Where money goes chart

This spending can be broken down into the following categories:

  • Hospital care
  • Physician services
  • Clinical services
  • Prescription drugs
  • Nursing care facilities
  • Home health care
  • Other personal health care costs
  • Government administration: includes all administrative costs associated with insuring individuals in health insurance programs
  • Net cost of health insurance: The difference between what insurers incur in premiums and the amount paid in benefits. This includes administrative costs, additions to reserves, rate credits and dividends, premium taxes and fees, and net underwriting gains or losses
  • Government public health activities
  • Investment spending

Although physician services was the second largest category of health spending, prior to the pandemic, spending on physician services generally grew more slowly than spending in the other large categories of personal health care. Physician spending grew by an average of 3.8% per year between 2009 and 2019 while hospital services (4.5%) and clinical services (6.6%) had higher growth rates. 

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In 2020, spending on physician services grew 7.0%, a substantially higher growth rate compared to previous years. This acceleration was driven by spending on federal relief programs (classified as “other federal programs” in the following chart). Spending growth decreased to 5.1% in 2021 as the decline in pandemic-related government expenditures offset the rebound in utilization of medical goods and services. 

2021 Health care spending: Who pays the bills chart

The $4.3 trillion in spending can also be broken down by “who pays the bill”?

  • Private health insurance
  • Out-of-pocket
  • Medicare
  • Medicaid
  • Other health insurance programs
  • Government public health activities
  • Other federal programs include pandemic-related funding
  • Other third-party payers and programs
  • Investment spending

Spending by the government to manage the pandemic was a driving factor in 2020 and 2021 NHE. Pandemic-related government expenditures was generally classified under government public health activities and other federal programs. Government public health activities is spending by the government to prevent or control public health concerns and to organize/deliver publicly provided health services. Other federal programs includes funding provided through the Provider Relief Fund (i.e., relief for health care organizations and providers that had expenses or revenue loss from the pandemic)** and the Paycheck Protection Program (i.e., loans backed by the U.S. Small Business Administration so that small businesses, including physician practices, could keep their workforce employed during the pandemic).*** 

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Government efforts to control the pandemic through public health activity resulted in spending in that category increasing from $107.1 billion in 2019 to $238.3 billion in 2020. In 2021, spending was $187.6 billion, less than the unprecedented levels in 2020, but still higher than before the pandemic. Government sponsored pandemic relief resulted in other federal programs spending increasing from only $14.0 billion in 2019 to $193.1 billion in 2020. In 2021, spending was $71.9 billion. As with spending on government public health activities, this was less than the unprecedented level in 2020, but still substantially more than before the pandemic.

*Centers for Medicare and Medicaid Services. National Health Expenditure Accounts: Methodology Paper, 2020 Definitions, Sources, and Methods (PDF). Centers for Medicare & Medicaid Services. December 2021.
**Health Resources and Services Administration. About the Provider Relief Fund and Other Programs. Health Resources and Services Administration, November 2021.
***U.S. Small Business Administration. Paycheck Protection Program: An SBA-backed loan that helps businesses keep their workforce employed during the COVID-19 crisis. U.S. Small Business Administration, 2022.

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