COVID-19 caused a big jump in health spending

HEALTH EXPENDITURES rose 9.7% to $4.1 trillion in 2020, primarily due to COVID-19 relief spending, according to actuaries at the Centers for Medicare and Medicaid Services.

The increase is the largest since 2002 and spending was more than 5% higher than during 2019. Health spending constituted 19.7% of gross domestic product. The spike in that share last year is the largest annual increase agency actuaries ever recorded, CMS statistician Micah Hartman said during a news briefing Dec. 15.

But when spending on pandemic programs like the Provider Relief Fund and the Paycheck Protection Program loans is excluded, health expenditures grew only 1.9%, largely because many people cut back on healthcare utilization during the start of the pandemic. Federal healthcare spending increased 36%, driven by public health and Medicaid.

Hospital, physician and prescription drug spending rose. Hospital spending, which amounted to $1.3 trillion and 31% of all healthcare spending, saw similar growth to 2019. Last year, the increase was due entirely to pandemic funding. Hospital prices increased 3.2%, compared with 2% in 2019, CMS found.

The uninsured rate declined slightly as 600,000 people gained coverage last year, Hartman said.