Pandemic Emergency Funds Spiked Healthcare Spending

By Jonathan Springston, Editor, Relias Media

National healthcare spending grew 9.7% in 2020 ($4.1 trillion for the year), the fastest recorded rate growth in almost 20 years, according to the National Health Expenditure Accounts (NHEA), an annual, comprehensive assessment of the U.S. investment in the health sector.

Actuaries underlined the unbelievable 36% growth in federal government spending on healthcare for 2020, attributed to the response to the COVID-19 pandemic emergency. The report authors noted line items of $122 billion for the Provider Relief Fund, $53 billion for the Paycheck Protection Program, and $114 billion for various public health targets (e.g., developing vaccines, testing, and medical facility preparedness).

The 9.7% growth in 2020 outpaced the 4.3% growth in 2019, but it is important to note some context. When the actuaries removed these emergency funds and other federal health spending, NHE growth for 2020 would be 1.9%, which the authors attributed to less use of healthcare-related goods and services (i.e., patients avoided doctor office visits because they did not want to contract COVID-19).

Private health insurance expenses accounted for 28% of the total national health spend, a large piece of the pie, but still smaller year over year 2019 to 2020, thanks in part to patients shying away from elective procedures and lower insurance enrollment rates. Hospital spending in 2020 was similar to 2019; administrators often used emergency relief funds in 2020 to help offset the loss of usually reliable revenue streams (e.g., elective procedures).

Nevertheless, U.S. hospitals have battled to balance the books, despite all the various emergency relief funds, through the nearly two-year public health emergency. Research compiled by private sector consultants indicates 2021 likely will be another year for administrators to forget.

For example, the authors of a report released in September estimated U.S. hospitals could end this year with a $54 billion net income loss. More recent reports show that despite easing caseloads and better physician productivity rates, operating margins could remain tight through the end of 2021. Further, analysts predict continued rises in labor costs and spending on healthcare goods, combined with concerns over outpatient revenue collections, will mean additional financial headaches heading into 2022.

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