Dec 15, 2021 - Health

Federal pandemic funding fuels surge in health spending

Annual growth of national health expenditures
Data: Office of the Actuary, Centers for Medicare & Medicaid Services; Chart: Baidi Wang/Axios

Americans spent more than $4.1 trillion on health care in 2020, almost 10% higher than what was spent in 2019, according to new independent federal data. That's the fastest annual growth rate since 2002.

The big picture: The spike in spending was due almost entirely to the influx of federal funding that went toward stabilizing the health care system during the coronavirus pandemic.

Between the lines: The federal government subsidized health care in several new ways during the pandemic.

  • Bailout funds and loans went to hospitals, doctors and nursing homes to help them weather the revenue they lost as people put off care.
  • The development and rollout of COVID-19 tests, vaccines and treatments came courtesy of the federal government.
  • State Medicaid programs and Affordable Care Act plans were stabilized with extra funds to keep people enrolled throughout the pandemic.
  • All of that federal funding didn't just keep the system afloat. It led to historically high profits for some of the biggest companies in the industry, and that trend has continued throughout 2021.

If you exclude those various subsidies and grants, the annual growth rate was 1.9% in 2020, actuaries told reporters.

  • That's much lower than prior years, but it's still an increase in spending, even though the health care system was largely shut down for several months last year.

The bottom line: The U.S. has the most expensive health care system in the world, and the pandemic made it even more expensive.

What to watch: Preliminary data for 2021 suggests a lot more people returned to get care in hospitals, doctors' offices and other facilities, especially after vaccines were distributed widely.

  • But the Omicron variant poses another threat, as many providers have said they are overwhelmed with COVID cases and postponing more types of care again.
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