National Healthcare Spending, Prices Saw Modest Increase in 2021

February 28, 2022  by  Allzone MS   269

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National healthcare spending increased by 3.4 percent in 2021, while the Health Care Price Index (HCPI) maintained a year-over-year growth of around 2 percent, according to Altarum’s February 2022 Health Sector Economic Indicators (HSEI) briefs.

Unlike the December 2021 and January 2022 briefs, Altarum included federal government expenditures in the February data, which significantly impacted healthcare spending.

The federal government provided financial assistance to support healthcare programs and providers during the COVID-19 pandemic through the Paycheck Protection Program, the Provider Relief Fund, and the Public Health and Social Services Emergency Fund.

Including this government support, national healthcare spending in 2021 increased by 3.4 percent. This modest growth reflects the fact that federal spending decreased significantly last year, going from $287 billion in 2020 to $170 billion in 2021.

According to the brief, without federal support, national healthcare spending would have increased by 8.4 percent in 2021, indicating a recovery from the recession during the pandemic. This growth without federal funds represents spending on healthcare goods and services.

With the addition of federal funding, the only time in the past two years that healthcare spending fell below January 2020 was in March 2020. By December 2021, healthcare spending was 11.9 percent higher than in January 2020.

Without including the federal funds, spending was below January 2020 levels for most of 2020 and through February 2021. In December 2021, spending was 6.4 percent higher than in January 2020 after excluding federal funds.

For all of 2021, healthcare spending accounted for 18.5 percent of gross domestic product (GDP) including federal expenditures, and would have accounted for 18.1 percent, excluding federal support.

Meanwhile, the prices of healthcare services saw slight growth, despite an increase in general inflation. In January 2022, the HCPI increased by 2.4 percent, the same growth it saw in December 2021. The HCPI has maintained a year-over-year growth of around 2 percent since April 2021, the brief reported.

In January 2022, the consumer and producer price indices increased by 7.5 percent and 9.7 percent, respectively.

“We expect overall healthcare price growth to eventually follow economy-wide inflation upwards, but we have yet to see a significant uptick in health prices at all comparable to overall inflation,” the brief stated. “As we’ve discussed previously, part of the story in slower healthcare price growth is that healthcare contracts and prices are negotiated in advance, making many healthcare prices initially less flexible to adjust to one-time shocks in the economy.”

Medicare and Medicaid also saw slow price growth, which may have contributed to the modest overall growth in healthcare prices. Healthcare services that the public payers covered saw price increases of less than 2 percent. In contrast, prices for services covered by private payers have been rising steadily since October 2021 and increased by 4.2 percent in January 2022.

Hospital care prices saw the most significant year-over-year increase of 2.9 percent, followed by physician and clinical services. Prescription drug prices also increased by 1.3 percent after a streak of decreasing costs, the brief noted.

After determining healthcare spending growth and price increases, Altarum found that overall healthcare utilization increased by 8.2 percent through December 2021.

In addition to increases in healthcare spending and prices, the healthcare industry saw a modest rise in employment in 2021 and 2022 so far as well. The industry added 18,000 jobs in January 2022 alone.

In 2021, the healthcare industry added 93,000 jobs. However, some care settings saw growth while others lost employees. For example, ambulatory care settings added 265,000 jobs, but hospitals ended 2021 down 31,000 jobs and residential care settings were down 142,000 jobs.

After a sharp decrease in spring 2020, ambulatory care employment increased to 1.7 percent above pre-pandemic levels. Meanwhile, hospital employment remained 2 percent below pre-pandemic levels. Residential care employment was the driving factor of slow healthcare employment recovery, as it dropped 12 percent below pre-pandemic levels, the brief stated.

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