The Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) has recently issued updated National Health Expenditure (NHE) estimates for 2020.  The key takeaway is that the 2020 data offers little insight into future national health care spending trends, due to the “unprecedented government response to the global pandemic” and the pandemic causing an overall reduction in utilization of medical services and goods.

For example:

• National health spending increased by 9.7 percent in 2020, the fastest rate since 2002, but if federal public health and other federal COVID-19 response spending is excluded, national health spending increased by only 1.9 percent, well below the 4.3 percent increase in 2019, primarily because people used less health care (see chart).

• Health care as a share of the economy rose to 19.7 percent in 2020 from 17.6 percent in 2019 but that was due to both an increase in federal spending in response to the pandemic and a decline in the economy as measured by the gross domestic product (GDP). According to the actuaries, the GDP decline in 2020 was the largest since 1938.

• The federal government’s share of national health spending substantially increased from 29 percent in 2019 to 36 percent in 2020 but that was driven by a dramatic increase in public health spending (a 113 percent increase between 2019 and 2020), new assistance furnished to health care providers through the Provider Relief Fund and the Paycheck Protection Program, and additional support for federal Medicaid programs via a temporary increase in the federal matching rate.

• Medicaid spending grew by 9.2 percent in 2020 but that was largely driven by a 5.1 percent increase (or 3.7 million increase) in enrollment, as Medicaid fulfilled its critical safety net role during the pandemic. Many people lost their jobs and health insurance during the pandemic-related economic downturn and became newly eligible.  In addition, as a condition of the increased matching rate, states were required to continue to cover beneficiaries who were already enrolled or newly enrolled for the duration of the COVID-19 public health emergency.  Medicaid spending per beneficiary actually grew slower in 2020 (4 percent) than in 2019 (4.6 percent).  Moreover, as federal Medicaid spending grew due to the higher matching rate, state and local government spending on Medicaid fell by 7 percent.

The CMS actuaries note that the National Health Expenditure estimates were subject to “many unique and, at times, opposing forces at play.”  They conclude “that the story that unfolded in 2020 and continues today is unlike anything that happened in the past 100 years.”  As a result, the latest NHE estimates should not be used to make any definitive conclusions about health spending trends in the United States.  Moreover, as the actuaries acknowledge, due to continued uncertainty about the course of the pandemic and its impact on the health care system, this may be the case for the NHE spending estimates for 2021 and 2022 as well.