U.S. health spending grows at slowest rate since 2013

Kevin B. O'Reilly , Senior News Editor

What’s the news: U.S. health spending growth fell by 8 percentage points in the second year of the pandemic, 2021. The nation’s rate of health spending growth was just 2.7% that year, down from 10.3% in 2020 and the slowest rate of growth since 2013. The 2021 rate of health spending growth also was lower than the pre-pandemic rates of 4.2% in 2019 and 4.6% in 2018.

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Total health spending in 2021 was $4.3 trillion—nearly $13,000 per capita. Health spending accounted for 18.3% of the nation’s gross domestic product (GDP) in 2021, down from “the unprecedented 19.7% of GDP in 2020,” according to a newly published AMA Policy Research Perspectives report.

“The substantial acceleration in spending in 2020 can be attributed to increases in federal government spending to manage the unprecedented COVID-19 pandemic. By 2021, pandemic-related federal government expenditures substantially declined, resulting in the low spending growth,” says the new AMA report.

“Although the 2021 federal government spending is still well above pre-pandemic levels, its decline offset the increased utilization of medical goods and services that rebounded due to delayed care and pent-up demand from 2020,” according to the report, “National Health Expenditures, 2021: Decline in Pandemic-Related Government Spending Results in 8-Percentage Point Decrease in Total Spending Growth” (PDF).

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Why it’s important: The data compiled and analyzed in the report paints “the big picture of spending patterns around the time of the pandemic. Much of the spending was driven by the federal government managing the pandemic, making it challenging to discern changes in utilization of medical goods and services.”

From 2019 to 2020, government spending on public health activities rose from $107.1 billion to $238.3 billion. Other federal spending, including programs such as the Provider Relief Fund and the Paycheck Protection Program, increased from $14 billion to $193.1 billion, says the report. In 2021, spending was $187.6 billion for government public health activities and $71.9 billion for other federal programs—lower than the unprecedentedly high levels of 2020, but still higher than before the pandemic.

When breaking down total health spending by funding source, government public health activities made up 4.4% of spending and other federal programs accounted for 1.7% in 2021. Private health insurance accounted for the largest share—28.5%—of total health spending that year, followed by:

  • Medicare, 21.2%.
  • Medicaid, 17.2%.
  • Out-of-pocket spending, 10.2%.

Notably, out-of-pocket spending had dropped 2.6% in 2020 “when access to medical goods and services were limited due to the pandemic.” In 2021, by contrast, out-of-pocket spending rose 10.4% as use of health care services rebounded, the report says.

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Learn more: Generally speaking, the 2021 data shows “the start of recovery from the pandemic.”

However, because of the drop in federal health spending, physician services grew at a lower rate of 5.1% in 2021, compared with 7% in 2020. Of all the categories of health spending, only prescription drugs and clinical services saw a faster rate of spending in 2021 compared with 20202—7.8% and 7%, respectively.

Find out more about the AMA’s annual analyses of U.S. health spending trends since 2010.