In 2020, for the first time, the federal government financed the majority of health care spending in the United States. Though the use of health care services declined during the first year of the pandemic as the country shut down and people avoided unnecessary interactions with doctors and hospitals, health care spending still grew by 9.7% in 2020 over 2019, reaching $4.1 trillion — a record high. That’s because the federal government spent record high amounts on public health, provider relief funds, and a larger social safety net, propping up the health care industry as a whole.
The government stepped in to support the health care industry to help meet the demands of an unprecedented pandemic. Through Operation Warp Speed, bolstering the strategic stockpiles of drugs, funding clinical trials and guarantee purchase orders for vaccines, supporting health facility preparedness, and increased enrollment in public health programs, public health spending increased over two fold from the year prior. Excluding federal public health activity and programs, health care spending only increased 1.9% over 2019.
The federal government provided financial relief to health care providers, which propped up the sector even while people used less care overall. Hospital and doctor spending largely remained constant in 2020 thanks to federal assistance to health care providers through the Provider Relief Fund ($122 billion) and the Paycheck Protection Program ($53 billion). Even while health care utilization was down, hospital expenditures increased 6.4% in 2020, similar to the 6.3% growth rate in 2019. Physician and clinical service expenditures increased 5.4%, more than a percentage point higher than the 4.2% growth in 2019.
Medicaid and the Affordable Care Act (ACA) served as a safety net as many people lost jobs. Though the pandemic led to huge economic and employment downturns, the number of uninsured people declined by 0.6 million, or 1.9%. This was in stark contrast to the great recession when 9.3 million people lost their health insurance tied to employment. This time, safety net programs like Medicaid and subsidies available through the ACA kept people from losing health care coverage during a public health emergency. Medicaid and CHIP enrollment increased to 83.2 million, up nearly 18% since February of 2020. Because many people didn’t use services or lost their private sector coverage, spending on health care by private businesses declined 3.1% in 2020 compared to a 3.8% increase in 2019.
The pandemic’s impact on the overall economy and the health care sector was unprecedented. The GDP contracted by 2.2% (the largest drop since 1938), but because of efforts to support the health care sector, the health spending share of GDP was 19.7%, a two-percentage point increase from 2019 (17.6%).
While there were many failures throughout the pandemic, the government stepped in and mitigated a lot of the damage that could have happened to the health care sector. It supported hospitals as COVID cases surged and demand for other types of health care services waned, it protected people from losing health care coverage, and it partnered with private industry to develop and distribute vaccines at an unprecedented speed. Democrats shouldn’t forget to highlight the successes of these programs as they seek to run on their records in 2022.
