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National health care spending decline in 2021 resulting from reduced Federal spending on health care

Annually, the Centers for Medicare and Medicaid Services (CMS) conducts a comprehensive analysis of health care expenditures in the United States. Not unsurprisingly, they report that the growth in health care spending slowed in the U.S., increasing only by 2.7 percent in 2021. In contrast, the previous year saw an increase of 10.3 percent, largely resulting from government spending responding to the COVID-19 pandemic. The share of the economy accounted for by the health sector fell from 19.7 percent in 2020 to 18.3 percent in 2021, but it was still higher than the 17.6 percent share in 2019. In 2021, the number of uninsured people declined for the second consecutive year, as Medicaid enrollment increased. 

Spending for hospital services increased 4.4 percent in 2021 to reach $1.3 trillion. Spending on physician and clinic services increased 5.6 percent 2021, despite cuts to Medicare Physician Fee Schedule (MPFS) payments. Federal COVID-19 supplemental funding, including the Provider Relief Fund and the Paycheck Protection Program declined 62.7 percent from $193.1 billion in 2020 to $71.9 billion in 2021.

There is clearly irony in these numbers. Physicians like radiologists face ongoing downward reimbursement trends for their services though Medicare payment levels, leading to genuine concern that the current MPFS update process fails to provide sustainable future reimbursement schedules. Each year, the Medicare payment system brings potential catastrophic payment cuts that can only be averted by Congressional action. 

Of course, an increase in the volume of studies performed has forestalled an overall decline in income for radiologists, but this data masks flaws in Medicare payment policy that need to be addressed. How long will providers have to depend on Congressional intervention annually to prevent built-in and arbitrary Medicare payment cuts from being far worse?

Today’s report shows that the decline in federal government health care expenditures in 2021 was driven by a reduction in other federal program spending associated with COVID-19 supplemental funding, including the Provider Relief Fund and the Paycheck Protection Program (PPP), which assisted businesses with payroll, increased expenses, and lost revenue due to the pandemic, as well as a decline in federal public health activity.

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medicare, diagnostic radiology, health care & life sciences

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