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Out-of-pocket health spending rises at highest rate since 1985

In 2021, out-of-pocket spending on health care grew by 10.4 percent, marking the fastest rate of growth since 1985.
Stethoscope and money.

Story at a glance

  • The findings come even as the number of Americans with health insurance increases. 

  • Out-of-pocket costs are typically paid in the form of deductibles or copays, or for services not covered by insurance.

  • The steep rise seen in 2021 follows a decrease in out-of-pocket spending in 2020 during the COVID-19 pandemic. 

U.S. spending on health care grew by 2.7 percent to reach a total of $4.3 trillion in 2021, or around $12,900 per person, according to new figures from the Centers for Medicare & Medicaid Services (CMS).

Although this growth was slower than the increase of 10.3 percent in 2020, out-of-pocket health care spending accounted for 10 percent of the overall share last year and increased by 10.4 percent — a rate not seen since 1985

In comparison, out-of-pocket spending fell by 2.6 percent in 2020 amid the COVID-19 pandemic, as Americans put off doctor’s appointments and other health services.

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The spike was driven in part by increased use of dental services, eyeglasses and medical supplies in 2021 following the 2020 decline, CMS’s Office of the Actuary found.

The National Health Expenditures Report has been collecting U.S. health care spending data since 1960.

The number of uninsured individuals in the United States decreased for the second year in a row in 2021, thanks to increased enrollment in Medicaid and private health insurance, authors noted. 

Roughly 8 percent of Americans, or 26 million people, are currently living without health insurance, marking an all-time low.

However, even with insurance, Americans may find themselves paying out-of-pocket for deductibles, co-pays and services that are not covered. 

The United States also spends more on health care than other wealthy countries, while costs of care continue to climb. 

Most Americans receive their health coverage from their employers, meaning they have little say in what services are covered. This lack of choice can limit competition and drive up prices. CMS data showed spending on health care by private businesses rose by 6.5 percent in 2021, compared with a 2.9 percent decline seen in 2020. The majority of this increase was driven by contributions to employer-sponsored private health insurance premiums. 

Employers also expect health care costs to rise by 6 percent next year, according to a Willis Towers Watson survey released in September.

On the whole, Americans’ health is also getting worse. Forty-two percent of the population is obese and 74 percent are overweight, CDC data show, while Americans have the highest rates of chronic disease, like diabetes and heart disease, among wealthy countries.

The CMS data show spending on retail prescription drugs rose by 7.8 percent in 2021 marking a total of $378 billion. This rate was faster than the 3.7 percent increase seen in 2020 and was driven by an increase in prescription drug use in 2021.

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