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ABSTRACT US health care spending increased 9.7 percent to reach $4.1 trillion in 2020, a much faster rate than the 4.3 percent increase seen in 2019. The acceleration in 2020 was due to a 36.0 percent increase in federal expenditures for health care that occurred largely in response to the COVID-19 pandemic. At the same time, gross domestic product declined 2.2 percent, and the share of the economy devoted to health care spending spiked, reaching 19.7 percent. In 2020 the number of uninsured people fell, while at the same time there were significant shifts in types of coverage.
The year 2020 was unlike any other in recent memory, as the COVID-19 pandemic swept across the world and disrupted nearly every aspect of normal life. The US health sector was affected by a number of factors, such as the direct treatment of the millions of Americans contracting COVID-19; the influence of social distancing restrictions and requirements regarding access to and use of health services; the short but dramatic two-month recession and its impact on health insurance coverage; and federal government spending on COVID-19 testing, vaccine development, insurance safety nets, and supplemental revenue support to providers. The many unique and, at times, opposing forces at play combined to result in national health expenditures increasing by 9.7 percent (the fastest rate since 2002) to $4.1 trillion in 2020, while gross domestic product (GDP) declined by 2.2 percent (the largest drop since 1938), which led to the health spending share of GDP reaching 19.7 percent, up from 17.6 percent in 2019 (exhibit 1).
Health care spending by the federal ment 36.0 percent in 2020 (compared with 5.9 percent growth in 2019) (exhibit 2), with much of the growth not directly linked to patient care events. Rather, spending growth was driven by the following: assisting health care providers-in particular, hospitals, physicians, and nursing homes-with revenue lost because of lower utilization and increased costs (through the Provider Relief Fund, which provided direct financial support to providers, and through loans made under the Paycheck Protection Program to provide assistance to firms with qualifying expenses), assisting states with Medicaid funding, and providing increased public health activity related to COVID-19. Increased federal government spending related to COVID-19 led to an increase in the...