Healthcare spending declines for first time in 60 years

Inflation-adjusted healthcare spending declined in the U.S. for the first time in 60 years, according to a July 27 report from Ann Arbor, Mich.-based Altarum.

Healthcare spending fell 1.7 percent in the first quarter of 2022 compared to the same period a year ago. As a share of gross domestic product, healthcare spending fell from a peak of 20 percent in 2020 to 18 percent in May 2022. Moreover, the reduction in expenditure occurred while economy-wide inflation reached 40-year highs, significantly impacting hospital input costs. 

"We expect that when final CMS national health expenditure data are released for 2021 and 2022 that they will likely show a meaningful dip in the real long-term health care cost trend, at least temporarily alleviating some of the spending pressures that occurred in 2020 due to the COVID-19 pandemic,” the report states.

According to data from the American Hospital Association, health systems have experienced surging labor costs, drugs, supplies, equipment, and other vital resources since the COVID-19 pandemic. Rising costs are illustrated with the 19.1 percent rise in labor expenses from 2019 to 2021, supply costs increasing 21 percent per patient overall, median drug costs up 37 percent per patient, and intensive care unit supply costs up 32 percent per patient. 

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