Total health care spending in the United States slowed in 2021 compared to 2020, only increasing by 2.7%, according to CMS' latest National Health Expenditures report. However, out-of-pocket health care spending saw a much larger increase, jumping 10.4% after a 2.6% decline in 2020.

How much the US spent on health care in 2021

According to the report, total health care spending in the United States grew by 2.7% in 2021, down from the significant 10.3% increase in 2020. Health care spending also made up a smaller portion of the overall economy in 2021 at 18.3% of the country's total gross domestic product compared to 19.7% in 2020.

In 2020, U.S. health care spending increased significantly due to the pandemic and high federal health care expenditures, which grew by a record 36.8%, for Covid-19 response efforts. In comparison, federal health expenditures decreased by 3.5% in 2021 as funding for Covid-19 declined.

Among the largest health care expenditure areas, prescription drugs saw the largest increase in 2021 at 7.3%, up from 3.7% in 2020.

In comparison, physician and clinical services and hospital care saw smaller increases in spending in 2021 compared to 2020. In 2021, physician and clinical care services increased by 5.6%, a slight decrease from the 6.6% in 2020.

Similarly, hospital care spending saw a smaller increase of 4.4% in 2021 compared to a 6.2% increase in 2020. According to CMS, the slower growth rate in 2021 "reflected a substantial decrease in funding in federal programs, including COVID-19 relief."

However, these smaller increases in health care expenditures were partially offset by increased spending by payers.

For example, out-of-pocket (OOP) health care spending, including for dental care and medical equipment, increased by 10.4% in 2021—the highest growth rate since 1985. This jump in OOP health care expenditures was likely due to increased use of medical services and goods after many people deferred care in 2020 due to the pandemic.

Spending on Medicaid and Medicare also increased by 9.2% and 8.4%, respectively. For Medicare spending, there was a 3.9% increase in traditional, fee-for-service plans and a 14.1% increase in private plans. Private health insurance also saw a 5.8% increase in spending in 2021, largely due to increased utilization and enrollment.

Overall, the federal government (34%) and households (27%) accounted for the largest shares of national health care spending, followed by private businesses (17%), state and local governments (15%), and other private revenues (7%).

"In the near term, the severity of the COVID-19 pandemic and its impacts on health care spending trends are expected to lessen while at the same time, federal COVID-19 funding continues to unwind and utilization trends stabilize," the report authors wrote. "However, there is still substantial uncertainty associated with this disease, which could have significant effects on future health care spending trends." (Owens, Axios, 12/15; Minemyer, Fierce Healthcare, 12/14; Frieden, MedPage Today, 12/14; CMS press release, 12/14; Armour, Wall Street Journal, 12/14)