Dec 14, 2023 - Health

U.S. health spending hit $4.5 trillion last year

Data: Centers for Medicare and Medicaid Services; Graphic: Rahul Mukherjee/Axios
Data: Centers for Medicare and Medicaid Services; Graphic: Rahul Mukherjee/Axios

Health care spending growth in the United States may be settling back into pre-pandemic patterns, a new federal analysis of 2022 health expenditures suggests.

The big picture: Medicare actuaries said slower spending growth last year stemmed from the end of the federal government's COVID-19 relief payments, which caused health spending to spike in 2020.

By the numbers: Health spending in the U.S. grew 4.1% last year, reaching $4.5 trillion, according to the report.

  • That was faster than the 3.2% growth in 2021 but more in line with the average 4.4% growth rate in the years leading up to the pandemic.
  • Health spending made up 17.3% of the economy in 2022, down from a peak of 19.5% in 2020, the pandemic's first year.
  • Out-of-pocket spending grew by 6.6% last year after jumping 11% in 2021 — the highest annual increase in almost 40 years. Slower growth in dental services, durable medical equipment and physician and clinical services were largely responsible for the reduced increase last year, actuaries said.
  • The U.S. spent $13,493 on health care per person in 2022.

Yes, but: With the volatility of COVID in the rearview mirror, it's hard to predict whether health spending growth will fall into a more predictable pattern.

  • "[T]rends are expected to be driven more by health-specific factors such as medical-specific price inflation, the utilization and intensity of medical care, and the demographic impacts associated with the continuing enrollment of the baby boomers in Medicare," said Micah Hartman, a statistician in the Centers for Medicare and Medicaid Services' Office of the Actuary.

Zoom in: Prices for personal health care services like hospitals, physician visits and home care grew at a slower rate than overall inflation, largely because their prices are often set in advance through regulation or contracts, officials said.

  • Medical inflation increased about 3.2% in 2022, compared to economywide inflation of 7.1%.
  • Retail prescription drug spending increased by 8.4%, faster than the 6.8% growth in 2021. Spending on brand-name drugs increased, in part due to increased use of diabetes and obesity drugs like Ozempic.

Of note: Last year's 2.7% increase in spending on physician and clinical services was the slowest rate in nearly a decade and was due to a slowdown in use of services and price growth.

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