U.S. Healthcare Spending Settling Down into Prepandemic Patterns

The increase in overall U.S. healthcare spending in 2022 fell back to pre-COVID-19 pandemic levels and healthcare spending as a proportion of the gross domestic product (GDP) declined slightly partly because inflation in the medical sector was lower than inflation in the rest of the economy, according to a report on national healthcare spending issued today by Centers for Medicare and Medicaid Services (CMS) actuaries.

The spending figures for 2022 show a healthcare sector settling down into some past patterns after a set of anomalies stemming for the pandemic, including a huge surge in federal government expenditures. 

The report, which was presented as a paper published in Health Affairs, also shows that the proportion of Americans with health insurance reached 92% in 2022, an all-time high, due largely to the increasing number of Americans enrolled in Medicaid and Affordable Care Act marketplace plans.

The report also shows that the annual growth spending on prescription drugs purchased from retail outlets jumped up to 8.4% in 2022, a bump up from the 6.8% increase in spending in 2021 and a departure from the low annual growth spending from 2016 and 2018. Retail spending on drugs reached $405.9 billion in 2022 and accounted for 9% total health expenditures. The uptick in retail prescription drugs — a category that does not includes drugs dispensed in hospitals and doctor’s offices —is the result of a combination of factors, including greater utilization and faster growth in prices, according to Micah Hartman, the first author on Health Affairs paper, and his colleagues on CMS National Expenditure Accounts Team.

Overall healthcare spending grew 4.1% in 2022, an increase from the 3.2% annual growth in 2021 but far below the pandemic-generated spike of 10.6% in 2020. Total spending reached $4.5 trillion in 2022, which accounted for the 17.3% of GDP compared with $4.3 trillion in 2021 that accounted for 18.2% of the GDP. From the 2016 to 2019, the annual growth in healthcare spending hovered between 4% and 5% and healthcare spending as a proportion of GDP hovered around 17.5%.

The CMS numbers show that 330.9 million Americans had health insurance coverage in 2022, an increase of 1.3 million people and percentage point difference of .6, from 91.4% to 92%. Medicaid enrollment increased for the third year in a row and the annual growth was higher than the annual growth in Medicare and private health insurance by a wide margin (7.2% vs. 1.9% vs. 1.5%, respectively. The report shows that Medicaid spending reached $805.7% billion in 2022, accounting for 18% of total healthcare expenditures, which is still less than Medicare spending of $944.3 billion in 2022 and a 21% share of total healthcare spending but the gap is closing.