Health spending grew 3.4% in 2021, Altarum report finds

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Including federal government support, national health spending grew by 3.4% in 2021, according to new data released by Altarum.

This growth in spending, the analysis found, reflected the fact that support from the federal government was strong in 2020, likely in response to the recession caused by the COVID-19 pandemic, and was lower in 2021.

Taking these support dollars out of both 2020 and 2021 estimates, spending growth from 2020 to 2021 would have been 8.4%, as the economy continued to recover.

With the increased federal government assistance, health spending fell below January 2020 levels only in March 2020. Without this assistance, spending would have remained below January 2020 levels throughout most of 2020 and through February 2021, numbers showed.

Including the federal support, health spending in December 2021 represented 18.8% of GDP; it was 17.8% of GDP if the additional government expenditures are excluded. 

For all of 2021, health spending represented 18.5% of GDP with the support and would have been 18.1% without it.

WHAT'S THE IMPACT

Prices paid by private insurance for healthcare services increased somewhat in January to 3.2% year-over-year, while Medicare and Medicaid price growth was significantly slower, at 1.1% and 1.6% respectively.

Hospital care prices were the fastest growing major category, at 2.9% year-over-year, while prescription drug prices increased 1.3% after a long period of zero and negative price growth throughout 2021.

Altarum's estimate of "implicit utilization" – spending growth minus changes in prices – shows overall health sector utilization increased by 8.2% in December 2021, with a 12-month average increase of 2.6%.

Meanwhile, on the employment front, healthcare employment grew modestly in January, adding 18,000 jobs. As with most of 2021, most of the growth was in ambulatory care settings, which added 14,700 jobs, while hospitals added 3,400 jobs and nursing and residential care settings were flat.

In terms of the broader economy, it added 449,000 jobs in January, surpassing consensus expectations. About 93% of the 20.5 million-job drop in employment seen early in the pandemic has been regained, with a remaining deficit of 2.87 million jobs compared to February 2020. The unemployment rate ticked up slightly to 4%.

THE LARGER TREND

The COVID-19 pandemic continues to have unpredictable effects on health spending and the broader economy. For instance, federal spending on healthcare increased 36% in 2020 in response to the pandemic, according to the 2020 National Health Expenditures Report prepared by the Office of the Actuary at the Centers for Medicare and Medicaid Services, released in December.

Also in 2020, the pandemic drove 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.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com