Spending on health care in US rises to $4.5 trillion in 2022; a return to pre-pandemic growth rates

After skyrocketing in the first year of the COVID-19 pandemic and then tempering almost as dramatically a year later, health care spending in the U.S rose just over 4% in 2022, hitting $4.5 trillion, the federal government announced Wednesday.

The annual growth in the nation’s health care spending appears to be returning to pre-pandemic trends, according to a new report from analysts at the Centers for Medicare & Medicaid Services (CMS). The report was published online Wednesday in the journal Health Affairs. 

In the four years before 2020, the first year of the COVID-19 pandemic, health care spending rose 4.2% to 4.6% a year, according to CMS.

While last year’s increase was higher than the 3.2% growth in health spending in 2021, it was less than half the 10.6% growth of health spending in 2020.

“This pattern reflects the volatility tied to the COVID 19 pandemic and the significant response by the federal government,” said Micah Hartman, a CMS statistician at a briefing for journalists on the report.

CMS produces the annual report on national health care expenditures, which various government agencies, including the White House Office of Management and Budget rely on as they produce economic and budgetary forecasts and plans.

With the slower growth in spending compared with 2020 and 2021, health care accounted for 17.3% of the nation’s overall economy in 2022. That was a decline from the first year of the pandemic, at 19.5%, the highest share ever recorded by the National Health Expenditures Accounts.

In 2020, national health expenditures “accelerated substantially due mainly to unprecedented COVID-19 supplemental funding and public health spending,” Hartman said. “The result was that the share of the GDP devoted to health reached 19.5% in 2020.”

The 2022 findings echoed the pre-pandemic picture from 2016 through 2019, when health care’s share of the economy hovered between 17.4% and 17.6%.

The current trend is less dramatic than longer-term CMS forecasts, which project health care spending to grow by 5.4% a year on average through 2031 and to take up one-fifth of the nation’s economy by then.

Higher spending on drugs

Spending on prescription drugs — about 9% of total health care spending — increased faster than other segments. Retail spending on medications totaled $405.9 billion in 2022 — an 8.4% increase from 2021, after growing by 6.8% from 2020.

The Biden administration has attempted to rein in prescription drug prices through the Inflation Reduction Act, which includes provisions to reduce the cost of monthly insulin and negotiate lower prices for some drugs covered under Medicare. And last week, Biden said the administration had the authority to break the patent on drugs developed using taxpayer money if their costs were too expensive. 

 As overall spending on health care increased modestly, the cost of care — how much patients and their insurance providers, public or private, pay for the care that they receive — rose less sharply in 2022. The medical price index increased 3.2%, according to the report, while that same year overall inflation hit 7.1%, a rate not seen in four decades.

Insured at all-time high

The percentage of Americans with health insurance reached an all-time high of 92% in 2022, CMS reported. That was due both to the pandemic continuous coverage for Medicaid patients as well as to measures that gave more U.S. residents access to health insurance through the health insurance marketplace established under the Affordable Care Act, said Aaron Catlin, deputy director of the CMS national statistics group.

Medicaid enrollment grew by 6.1 million in 2022, a result of the requirement for continuous Medicaid coverage that Congress enacted in early 2020, CMS economist Anne Martin said. That requirement ended earlier this year and Medicaid programs are in the process of “unwinding” by requiring enrollees to establish their eligibility for the program.

Medicaid saw the single largest growth in spending on health care — 9.6% — totaling $805.7 billion in 2022. Spending on Medicare was up 5.9%, to $944.3 billion, in 2022, said Martin, while enrollment in Medicare was up 1.9%.

Enrollment through the ACA marketplace was up by 1.7 million and employer-sponsored insurance enrollment increased by 1.5 million. The 1.5% increase in private insurance coverage in 2022 marked “the fastest growth and enrollment since 2015,” Martin said.

Subsidies on premiums for individual insurance purchased through the ACA marketplace, first put in place under the American Rescue Plan Act and later extended in the 2022 Inflation Reduction Act helped drive the stronger enrollment in the marketplace plans, Catlin said.

Private health insurance and Medicare each saw spending increase 5.9%. Consumers’ out-of-pocket health care spending, which includes copayments and other forms of unreimbursed medical expenses but not health insurance premiums, rose 6.6%.