U.S. Health Care Spending Jumped 9.7 Percent to $4.1T in 2020: Report Shows

Health Care Spending Up

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By Lora Korpar

Fellow

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A government report released Wednesday showed a 9.7 percent jump in health care spending to $4.1 trillion in 2020, doubling the usual growth rate.

The growth was mostly due to Congress approving bipartisan spending plans, giving tens of billions of dollars to private health care providers to keep them afloat. Funding for COVID-19 tests, vaccines and treatments also accounted for a lot of the growth.

The number of uninsured people stayed relatively constant last year, not rising as some might have expected as many switched to Medicare and Medicaid coverage instead of employer coverage. Extra government financial assistance to state Medicaid programs was also a factor in the spending growth.

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"The story that unfolded in 2020 and continues today is unlike anything that has happened in the past 100 years," a Centers for Medicare and Medicaid Services report said.

Several economists, such as Sara Collins of the Commonwealth Fund, agree that the government's 2020 spending strategy was mostly successful.

"The bipartisan federal relief effort in 2020 was critical to shoring up the U.S. health system and helping millions of people stay insured during a national public health emergency—these data provide the hard evidence," Collins said. "This is absolutely a story of a sweeping bipartisan federal relief effort that worked."

Health Care Spending Up

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In 2020, health care accounted for nearly $1 of every $5 in the economy.

Along with direct federal spending on COVID countermeasures and the Medicaid money for states, the strategy largely worked, said economist Douglas Holtz-Eakin, a former director of the nonpartisan Congressional Budget Office and longtime policy adviser to Republicans.

"The COVID cases precluded the hospitals from having their usual book of business," said Holtz-Eakin. "The bailout money from the federal government was really important when the other sources just dried up." A $122 billion Provider Relief Fund, through which hospitals could apply for taxpayer money to offset their losses, was the linchpin.

"When I look at 2020, it wasn't perfect, but I think Congress deserves high marks for what they got done," added Holtz-Eakin.

The $4.1 trillion tab for 2020 represents an increase of about $365 billion from national health spending in 2019. It works out to $12,530 per person.

In other highlights, the report found:

Medicare rolls grew more slowly in the first year of the pandemic, but part of the reason was that people were dying. "The deceleration was driven in part by increased mortality in the population age 65 and older on account of the pandemic," the report said. Seniors accounted for 14 percent of COVID cases, but 80 percent of deaths.
Increased federal Medicaid funding helped ease the financial burden of the pandemic on state and local governments. Health care spending financed at the state and local level decreased by about 3 percent in 2020. The federal share of Medicaid spending was about 69 percent in 2020, the highest percentage in the 50-plus years of the program.
Out-of-pocket health care spending by individuals declined by 3.7 percent, a rare occurrence. That was largely due to postponed surgeries, dental care and diagnostic procedures such as colonoscopies. Employers who finance health insurance coverage for their workers also spent less.

This year, Americans are politically polarized over vaccine mandates and mask requirements, and COVID-19 is likely to have a continuing impact on U.S. health care spending.

"There will likely be notable effects from the widespread vaccination efforts that began in the spring of 2021 and from the emergence of the delta variant in the summer," the report said. "Uncertainty remains regarding how the pandemic may evolve during the winter months given the emergence of the Omicron variant."

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