U.S. Healthcare-Spending Growth Slowed in 2021, Federal Report Finds

Wall Street Journal | By Stephanie Armour
The analysis from the Centers for Medicare and Medicaid Services says national healthcare spending grew in 2021 to $4.3 trillion. 
Overall health spending had risen by 10.3% in 2020, and the more moderate increase last year was largely driven by a drop off in federal spending related to Covid-19. In fact, federal health spending fell 3.5% in 2021 to $1.46 trillion after surging almost 37% in 2020. At the same time, there was an uptick in spending on insurance coverage and healthcare services in 2021.
The healthcare share of the gross domestic product was 18.3% in 2021, down from 19.7% in 2020.
Medicare spending swelled 8.4% in 2021 after rising by 3.6% in 2020, with a strong rate of spending growth in Medicare private plans and increases in spending on hospital care and doctor and clinical services. 
Medicaid, a state-federal program for the low income and disabled, saw a 9.2% increase in spending in 2021. The pace was similar to 2020 but far higher than the average 2.9% rate of spending growth in the 2017 through 2019 period. The spending rate was driven by faster enrollment in Medicaid and a restriction on states’ ability to disenroll enrollees during the pandemic public-health emergency. 
Private-health-insurance spending rose 5.8% in 2021 after a decline of 1.1% in 2020, and accounted for 28% of total healthcare spending last year—an uptick largely due to more enrollment and use by consumers. Most of the growth in enrollment came from the individual market, as more people signed up for coverage because Congress passed legislation to enhance Affordable Care Act premium subsidies. Employer-sponsored health insurance saw its second consecutive year drop in enrollment. 
Out-of-pocket health spending last year rose by 10.4%, marking the fastest rate of growth since 1985, as people resumed visiting doctors and obtaining elective health procedures once the impact of the pandemic lessened. The faster growth was especially notable in dental care, which saw spending jump 18% in 2021 after a drop of 11% in 2020.
Retail-prescription-drug spending rose 7.8% to $378 billion in 2021, a brisk pace compared with the 3.7% spending growth rate in 2020. Private health insurers, Medicare, Medicaid, and consumers’ out-of-pocket spending all experienced the faster growth, with less spent on newly available generic medications compared with spending on newly available higher-priced brand name drugs. 
Overall spending on hospital care, meanwhile, rose 4.4% to $1.3 trillion in 2021 as use of services increased after Covid-19 restrictions on elective procedures and less urgent care eased. Physician and clinical services saw a 5.6% increase in spending last year as patient visits picked up again.