Healthcare Spending Hit $4.5T in 2022, Up 4.1%

The growth is in line with pre-pandemic rates; U.S. insured population hits historic high.

The nation's healthcare expenditures hit $4.5 trillion in 2022, increasing by 4.1% to $13,493 per person, federal actuaries reported Wednesday.

The analysis by the Office of the Actuary at the Centers for Medicare and Medicaid Services, published online Wednesday by Health Affairs, notes that strong growth in Medicaid and commercial insurance spending was offset by declining supplemental funding related to the coronavirus pandemic.

Growth in 2022 was faster than the 3.2% rate of growth in 2021, but much slower than the 10.6% rate of growth in 2020 as the pandemic raged.

The 4.1% spending increase in 2022 was also much slower than the year's 9.1% growth in the gross domestic product. Healthcare spending's share of GDP also dropped to 17.3%, lower than 18.2% share in 2021, and 19.5% in 2020, the highest share in history. Per capital health spending grew 3.7%.   

"Healthcare expenditures since 2020 have reflected volatile patterns associated with the COVID-19 pandemic and the federal government's response to the public health emergency," Micah Hartman, a statistician in the CMS Office of the Actuary and first author of the Health Affairs article, says in a media release.

"The growth in healthcare spending in 2022 of 4.1% was more consistent with the pre-pandemic average annual growth rate of 4.4% over 2016-19," Hartman says. "It remains to be seen how future healthcare spending trends will materialize, as trends are expected to be driven more by health-specific factors such as medical-specific price inflation, the utilization and intensity of medical care, and the demographic impacts associated with the continuing enrollment of the baby boomers in Medicare."

The analysis notes that growth in total healthcare spending in 2022 reflected a slowdown in personal healthcare spending that was more than offset by faster growth in non-personal healthcare spending.

The slowdown in personal healthcare spending was pegged to slower growth in the hospital care spending, which fell from 4.5% in 2021 to 2.2% in 2022. Also, dental services spending fell from 18.2% in 2021 to 0.3% in 2022, and physician and clinical services fell from 5.3% in 2021 to 2.7% in 2022.

Non-personal healthcare spending accelerated in 2022 due largely to a turnaround in the net cost of insurance, the analysis shows.

Other highlights:

• Medicaid spending increased 9.6% in 2022 after growth of 9.4% in 2021 and 9.3% in 2020. From 2019-22, cumulative Medicaid spending increased 31%, or 9.4% per year on average, and enrollment accounted for most of the growth as it increased 24.6%. Private health insurance spending increased 5.9% in 2022 after an increase of 6.3% in 2021 and a decline of 0.8% in 2020.
   
• The uninsured population declined in 2022 for the third straight year, falling from 28.5 million in 2021 to 26.6 million in 2022, while the insured share of the population increased to 92%—a historic high. Marketplace enrollment grew by 1.7 million people in 2022, and employer-sponsored insurance grew by 1.5 million people, accounting for 86% of total private health insurance enrollment and 88% of spending. Medicaid enrollment grew by 6.1 million people in 2022. 
   
• Private health insurance spending (5.9% growth)—reached $1.3 trillion in 2022 and accounted for 29% of total health expenditures. Total private health insurance spending increased 5.9% after 6.3% growth in 2021. Private health insurance spending for medical goods and services grew 5.6% in 2022 after growth of 10.1% in 2021. The slower growth was driven by spending for hospital care, physician and clinical services, and dental services, all of which grew more slowly in 2022 than 2021, when a pent-up demand for elective surgeries and procedures forgone in 2020 increased. Per enrollee, private health insurance spending increased at a rate of 4.3% in 2022 after growing 5.9% in 2021.
   
• Medicare spending (5.9% growth)—reached $944.3 billion in 2022, accounting for 21% of total national healthcare expenditures. Total Medicare spending increased at a slower rate in 2022, 5.9%, compared with 7.2% growth in 2021. Per enrollee Medicare expenditures increased 3.8% in 2022, compared to 5.4% growth in 2021. Medicare spending for personal healthcare increased 4.9% in 2022 compared with 9.4% growth in 2021, driven by slower growth in spending for hospital care and physician and clinical services. Fee-for-service Medicare enrollment continued to decline for the fourth consecutive year, decreasing 3.0% in 2022 after falling 3.8% in 2021. Medicare private health plan enrollment grew 8.5% in 2022 compared with a 10% increase in 2021.
   
• Medicaid spending (9.6% growth)—reached $805.7 billion in 2022, accounting for 18% of total national health spending. Medicaid spending increased 9.6% in 2022—the third consecutive year of growth above 9%. Medicaid spending for goods and services increased 9.9% in 2022 (the same growth rate as in 2021) as spending growth for hospital care slowed, offset by a faster rate of growth for other health, residential, and personal care services. On a per enrollee basis, Medicaid spending averaged 1.7% during 2020-22, in part because of large increases in enrollment of qualifying children and adults, who tend to have lower per enrollee expenditures than disabled and elderly enrollees.
   
• Out-of-pocket spending (6.6% growth)—reached $471.4 billion in 2022, accounting for 11% of total national health expenditures. Out-of-pocket spending increased by 6.6% in 2022 after an 11% increase in 2021. Slower growth for dental services, durable medical equipment, and physician and clinical services were the primary contributors to the overall slower growth in out-of-pocket spending in 2022 following rapid growth in 2021.
   
• Hospital spending (2.2% growth)—reached $1.4 trillion in 2022, representing 30% of overall healthcare spending. Growth in expenditures for hospital care was 2.2% in 2022, lower than the 4.5% growth in 2021. The slower growth in 2022 reflected a decrease in hospital care spending by private health insurance, Medicare, and Medicaid and by a decline in other private revenues.
   
• Physician and clinical services spending (2.7% growth)—reached $884.9 billion, or 20% of total healthcare expenditures in 2022. Spending growth increased 2.7% in 2022, the slowest rate of growth in almost a decade and lower than the increases of 5.3% in 2021 and 6.6% in 2020. This slower growth is due to a slowdown in the use of services and slower growth in prices. Spending for independently billing laboratories slowed in 2022 because of reduced COVID-19-related testing.
   
• Retail prescription drug spending (8.4% growth)—reached $405.9 billion in 2022 and represented 9% of overall health spending. Growth in retail prescription drug spending was 8.4% in 2022, faster than the 6.8% growth in 2021. The increase in spending growth for retail prescription drugs was due to several factors, including faster growth in utilization and prices as well as shifts in the mix of drugs purchased.