Did Healthcare Spending Really Return to Pre-Pandemic Levels?

2022 was hardly a year of fiscal austerity. Monetary expansion from years before resulted in 8 percent inflation. Congress passed a $1.7 trillion omnibus package and pledged $45 billion in support to Ukraine. The United States also spent nearly $170 billion in public health efforts in 2022 alone, despite President Biden’s statement that the COVID-19 pandemic was over

So, can it really be the case that US healthcare spending in 2022 returned to its pre-pandemic level? Many are saying so. 

For example, a headline for an article published in The Hill reads, “US spent $4.5 trillion on health care last year, a return to pre-pandemic levels.” A report compiled by the Peterson Healthcare System Tracker finds, “As of mid-2022, healthcare utilization has rebounded from the beginning of the pandemic.” 

But these headlines and calculations are misleading. 

A more thorough analysis performed in the peer-reviewed journal Health Affairs finds that the growth rates in healthcare spending in 2019 and 2022 are similar. Total healthcare spending increased by 4.1 percent in 2022 compared to 4.6 percent in 2019. However, the article notes, “the COVID-19 pandemic and the unprecedented government response to the public health emergency dramatically affected health care expenditure trends.” 

Dramatic is an understatement. Healthcare spending increased 10.6 percent in 2020 and another 10.1 percent in 2021. Both constitute the largest annual GDP increase since 1984 (when the US economy climbed out of a steep recession). Growth rates accounted for, and total US healthcare expenditures in 2022 accounted for about $4.5 trillion- increasing nearly $700 billion from pre-pandemic levels. 

But where did that additional spending go? Physician and hospital expenditures were down in 2022 despite anticipated “pent-up demand” from a lack of healthcare access in the early stages of the pandemic.

Sadly, but not unexpectedly, much of the money spent to combat the pandemic seems to be wasted or stolen. As an article in the Associated Press reports, “Fraudsters potentially stole more than $280 billion in COVID-19 relief funding; another $123 billion was wasted or misspent. Combined, the loss represents 10% of the $4.2 trillion the U.S. government has so far disbursed in COVID relief aid.”

Healthcare-specific spending was similarly wasted. 

Another Health Affairs analysis finds that 15 and 30 percent of healthcare expenditures in 2021 were due to administrative costs. The federal government spent about $30 billion developing and distributing COVID-19 vaccines during the pandemic. However, tens of millions of shots were thrown out. Thousands of field hospitals built to treat excess capacity COVID-19 patients cost taxpayers $660 million. Most were never used. 

All assessments of US healthcare spending involve complicated estimates and astronomical financial totals. But two things are clear. First, expenditures haven’t decreased. Second, increases in healthcare expenditures aren’t always due to improved access, quality, or other features we’d like to expect from spending trillions of dollars.

The pandemic changed many things about our healthcare system—not this.

Raymond J. March is a Research Fellow at the Independent Institute and Assistant Professor of Agribusiness and Applied Economics at North Dakota State University.
Beacon Posts by Raymond J. March | Full Biography and Publications
  • Catalyst
  • Beyond Homeless
  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org