Federal healthcare spending increased 36% in 2020 due to impact of pandemic
The uninsured rate dropped slightly as enrollment increases in Medicaid and the ACA offset losses in employer-sponsored coverage.
Photo: Kiyoshi Hijiki/Getty Images
Federal spending on healthcare increased 36% in 2020 in response to the COVID-19 pandemic. This compares to growth of 5.9% 2019.
The acceleration was largely driven by Provider Relief Fund and Paycheck Protection Program loans, increased spending for federal public health activity and growth in the federal portion of Medicaid payments, according to the 2020 National Health Expenditures Report prepared by the Office of the Actuary at the Centers for Medicare and Medicaid Services.
Hospitals and other providers received $122 billion in Provider Relief Funds to help ease revenue losses. The Paycheck Protection Program added $53 billion to federal spending and public health initiatives added another $114.9 billion. The latter included funds for vaccine development, COVID-19 testing and health-facility preparedness.
The number of uninsured individuals decreased from 31.8 million in 2019 to 31.2 million in 2020 as enrollment increases in Medicaid and in Affordable Care Act plans more than offset the pandemic's significant effect on employment and the resulting reduction in employer-sponsored coverage, according to the report.
WHY THIS MATTERS
The COVID-19 pandemic had a dramatic impact on the nation's health sector in 2020, driving a 9.7% growth in total national healthcare spending, bringing spending to $4.1 trillion, according to the report.
For almost all healthcare services, in particular for hospitals, physicians and nursing homes, increased federal spending in response to the COVID-19 pandemic far outweighed the negative or slow growth in private health insurance, Medicare and out-of-pocket spending that was associated with a decrease in the use of care in 2020.
2020 SPENDING TRENDS
Trends in major payer spending in 2020 showed private health insurance spending decreased 1.2% to $1.15 trillion in 2020, accounting for 28% of total national health spending. This was due to a decline in private health insurance enrollment and lower use of healthcare services, such as elective procedures, during the initial stages of the COVID-19 pandemic.
Medicare spending totaled $829.5 billion in 2020, representing 20% of total healthcare spending. Medicare spending increased in 2020 by 3.5%, compared to 6.9% growth in 2019.
Fee-for-service expenditures declined 5.3% in 2020, down from a growth of 2.1% in 2019. The decrease was largely attributable to a decline in expenditures for healthcare goods and services for the first time since 1999 because of the pandemic.
Medicare private health plan spending grew 17.1%, an increase from the 15.3% growth in 2019.
Medicaid spending increased 9.2% to $671.2 billion, compared to a 3% growth in 2019, which was primarily driven by increased enrollment due to the pandemic.
Medicaid hospital spending rose 6.7% in 2020, faster than in 2019, largely due to enrollment growth and increased Medicaid supplemental payments to hospitals, inpatient payments and payments to mental health facilities.
Out-of-pocket spending declined by 3.7% in 2020 after a 4.4% increase in 2019. This decrease was driven by decreased use of healthcare and little or no cost-sharing requirements for COVID-19 testing and treatment in 2020.
Hospital spending was relatively steady in 2020 compared to 2019 (6.4% and 6.3%, respectively) and reached $1.3 trillion in 2020. The growth in 2020 reflected a substantial amount of COVID-19 relief funding and faster increases in Medicaid spending for hospital care, offset by declines in private health insurance and out-of-pocket spending and slower growth in Medicare spending.
Physician and clinical services spending was $809.5 billion in 2020, growing by 5.4% (compared to 4.2% growth in 2019). Like hospital care, this increase was largely due to substantial growth in funding from federal programs that provided COVID-19 relief and a growth in expenditures for independently billing laboratories for COVID-19 testing.
Retail prescription drug spending increased 3%, to $348.4 billion in 2020, a slower rate than in 2019, when spending increased 4.3%. The slowdown was primarily a result of a 4.2% decline in out-of-pocket expenditures for retail drugs because of slower utilization and an increased use of coupons. Price growth slowed for brand-name drugs and declined for generic drugs, leading to a slight 0.1% decrease in total retail prescription drug prices.
Private businesses' healthcare spending declined 3.1% in 2020, after increasing 3.8% in 2019. The largest category of private business' health spending was contributions to employer-sponsored private health insurance premiums, which declined 3.6% in 2020 due to declines in enrollment and reduction in the utilization of healthcare services.
Households' healthcare spending experienced slower expenditure growth in 2020, increasing 1.1% in 2020 after a growth of 4.4% in 2019. Out-of-pocket spending and households' contributions to employer-sponsored health insurance premiums were the largest contributors to the deceleration.
THE LARGER TREND
Due to the impact of the COVID-19 pandemic, health expenditures grew in 2020 at the fastest rate of growth experienced since 2002. However, when spending for federal public health and other federal programs (which includes COVID-19 supplemental funding) is removed, NHE growth was only 1.9%, a slower rate of growth from the 4.3% increase in 2019, largely due to reduced use of medical care goods and services because of the pandemic.
The National Health Expenditures report has been published annually since 1960.
Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com
