Patient Support & Advocacy

Health spending back to pre-COVID rates—but not for physicians

Kevin B. O'Reilly , Senior News Editor

What’s the news: In the nation’s first full year after widespread availability of safe and effective SARS-CoV-2 vaccines to combat COVID-19, U.S. health spending on physician services grew at just a 2.6% rate in 2022. That was down from 7% in 2020, 4.8% in 2021 and 3.9% in the prepandemic year of 2019. 

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That slowdown was “due to both slower growth in prices and utilization of services,” according to an AMA Policy Research Perspectives report. The sluggish growth in physician spending pales in comparison to the continued growth in spending on prescription drugs, which saw 8.4% growth in 2022. 

Moreover, even as the rate of physician growth slowed, the report (PDF) concludes that “the big picture measures for 2022 suggest that U.S. health spending is back to similar growth rates as before the pandemic.”  

The AMA report examines trends in national health spending, which was $4.4 trillion in 2022, amounting to 17.3% of the nation’s gross domestic product—down from 19.5% in 2020 and 18.2% in 2021. 

Why it’s important: The slowdown in spending on physician services reflects a broad payer picture of U.S. health spending, as the report tallies spending by private health insurers, Medicare, Medicaid, by patients’ paying out of pocket and a variety of other sources.  

The deceleration in physician services spending comes with drops in physician pay schedule updates, after the peak of the COVID-19 pandemic, amid physician and health worker shortages and rising inflation, and as the Change Healthcare cyber outage poses huge disruptions to the medical claims-processing systems.  

“The need to stop the annual cycle of pay cuts and patches and enact permanent Medicare payment reforms could not be more clear,” AMA President Jesse M. Ehrenfeld, MD, MPH, said in March following the House vote on the government-funding deal that reduced the 2024 Medicare pay cut by about half. 

Medicare physician payment has effectively been cut 29% (PDF), adjusted for practice-cost inflation, from 2001–2024. The Medicare physician payment system lacks an adequate annual physician payment update, unlike those that apply to other Medicare provider payments (PDF). A continuing statutory freeze in annual Medicare physician payments is scheduled to last until 2026, when updates resume at a rate of 0.25% per year indefinitely, well below inflation rates.  

Learn more: The new AMA report also includes exclusive data showing decadelong trends in spending on traditional Medicare fee-for-service compared with Medicare private plans such as Medicare Advantage. While fee-for-service spending only grew 1.4% annually between 2012–2022, spending on private plans in Medicare rose 11.7% a year during that period. 

While only 45.8% of Medicare patients are enrolled in Medicare private plans, they account for half of all Medicare spending, says the AMA report. 

Find out how the AMA has challenged Congress to work on systemic reforms and make Medicare work better for you and your patients. The AMA’s work will continue, fighting tirelessly against future cuts—and against all barriers to patient care.