Health spending growth normalized in 2022 post-COVID, CMS says

Healthcare spending grew 4.1% in 2022, faster than the 3.2% spending growth in 2021 but notably slower than the rate of 10.6% in 2020.

Article By: Rebecca Pifer

Blog Source From : https://www.healthcaredive.com/

Dive Brief:

• Health spending growth started to normalize last year after volatility during the COVID-19 pandemic, when spending spiked as the federal government funneled funds into combating the pandemic.
• U.S. healthcare spending reached $4.5 trillion in 2022 — an all-time high, according to new CMS data published in Health Affairs. Though 2022’s spending growth of 4.1% was faster than the 3.2% spending growth in 2021, it’s notably slower than the rate of 10.6% in 2020.
• Strong growth in Medicaid and private insurance spending last year was offset by declining federal spending as the pandemic eased, researchers found. Still, federal spending on public health has remained slightly elevated above pre-pandemic levels.

Dive Insight:

The CMS first released topline health spending data for 2022 in June, but Wednesday’s comprehensive breakdown illustrates just how drastically the pandemic roiled U.S. healthcare spending over the past four years.

Last year, healthcare spending grew more slowly than the general economy as overall prices grew at a 40-year high.

Over 2022, the U.S. gross domestic product increased 9.1%. As a result, healthcare spending’s share of the economy fell to 17.3% — lower than the 18.2% in 2021 or the 19.5% in 2020, the highest share in history.

Health spending growth is normalizing coming out of COVID

Growth in national health expenditures (NHE) and gross domestic product (GDP), 2016-2022

Hospital care continued to account for the brunt of healthcare dollars last year, making up 30% of all spending. Twenty-three percent of all spending was spent on “other” services like dental, home health and durable medical equipment, while 20% of spend was on physician and clinical care and 9% on prescription drugs. 

Last year, spending grew more slowly for hospital care and physician and clinical services than in 2021, while spending on prescription drugs grew faster.

Hospitals’ decelerated growth rate reflects slowing payer spend, along with lower utilization as measured by inpatient days and discharges, CMS actuaries said.

As for the payer breakdown, Medicare and private health insurance spending were both up about 6% to $944.3 billion and $1.3 trillion, respectively. Medicaid spending jumped 9.6% to $805.7 billion.

“Among all of the major payers, spending growth slowed down. A lot of that has to do with a slower growth in utilization coming off the rebound of increased service use in 2021,” said CMS economist Anne Martin during a press briefing Wednesday.

That includes a lower demand for elective surgeries after some care delayed in the pandemic’s early days was completed in 2021, Martin said.

The CMS expects health spending growth to once again outstrip growth in the overall economy over the next decade. Medicare spending should grow the fastest due to an expected increase in hospital volume and intensity growth, and an increase in enrollees as more baby boomers age into the government health insurance program.