During the peak COVID timeframe in 2021, the U.S. spent nearly $4.3 trillion on health care. Government insurance programs, such as Medicare and Medicaid, made up 42% (or a whopping $1.8 trillion of national health care spending) in 2021. That’s according to the Centers for Medicare and Medicaid Services (CMS), which says private insurance programs, including employer-sponsored plans and plans purchased through the Affordable Care Act, made up 28% of spending, or about $1.2 trillion.
Also, out-of-pocket spending, such as premiums paid by individuals and other out-of-pocket costs, spending by third-party payers, investment in research and equipment, and public health activity accounted for the remaining 29%, or $1.2 trillion, of national health spending.
Breaking it down even further, in 2021, about 64 million Americans received health insurance through Medicare. The largest component of Medicare spending is on hospital care services, which accounted for nearly 40%, or $351 billion, of spending in 2021. Hospital care has been declining, however, as a share of Medicare spending since a prescription drug benefit became part of the program in 2006. Over the last two decades, spending on prescription drugs grew from less than $2 billion in 2000 to $120 billion in 2021.
About 77 million Americans, including children below the poverty level, nursing home residents, and non-elderly adults with disabilities used Medicaid in 2020. Medicaid spending for hospital care has been the largest portion of total payments for the program, making up roughly 35% of total spending on average, and is projected to stay relatively stable. Overall, spending for dental and other health, residential, and personal care expenditures are driving the growth in Medicaid payments. In the past 20 years, such spending has more than tripled from about $41 billion to $154 billion.
In 2020, private insurance programs covered 217 million people. Spending on hospital care services is the largest source of payment by private insurance programs. Such spending has tripled in the past two decades, from $150 billion to $449 billion. Another driver of overall growth in spending by private insurance is prescription drugs. Such spending has grown from $70 billion in 2000 to $152 billion in 2021.
CMS predicts federal spending for Medicare and Medicaid will increase faster than private spending. For example, according to their projections from March 2022, Medicare spending will climb from about $1.0 trillion in 2022 to $1.7 trillion in 2030, an increase of 68%. Medicaid spending would grow from $0.8 trillion to $1.2 trillion, an increase of 48%. Meanwhile, spending by private insurance programs would increase from $1.3 trillion to about $2.0 trillion, an increase of 50%.
According to the Peterson Center on Healthcare, some solutions to the continuing rise in health care spending could lie in tracking health care spending at the state level and addressing shortages and the high prices for medications, to name a few.