Patients' health care spending spiked in 2021

Patients' health care spending spiked in 2021 unknown Data: CMS; Chart: Axios Visuals

Americans' out-of-pocket health spending rose 10.4% in 2021, a growth rate not seen since 1985 that was driven in part by demand for dental services, eyeglasses and medical supplies, according to Centers for Medicare and Medicaid Services' annual National Health Expenditures report.

The big picture: Overall health spending grew by only 2.7%, a much smaller rate than the 10.3% bump seen in 2020. But the decline of special pandemic and public health-related federal funding is a huge factor in the 2021 results and masks a sharper spike in other areas.

• When these spending buckets were excluded, total expenditures rose in 2021 by 7.6%, generally a reflection of pent up demand for medical services after COVID vaccines became available, per the CMS' Office of the Actuary.

Why it matters: Out-of-pocket spending on copays and deductibles is when most Americans become most acutely aware of health care costs — and what often makes care unaffordable.

• That's especially true for people whose insurance premiums are subsidized, either by their employer or the government.
• Out-of-pocket spending rose particularly starkly for dental services, medical equipment — including eyeglasses and contact lenses — and physician and clinical services.

What they're saying: "I'm sure families felt the big increase in out-of-pocket spending in 2021," said KFF's Larry Levitt.

• "But, it was magnified by the fact that out-of-spending fell by 2.6% in 2020 when the pandemic was resulting in many fewer people getting medical care other than for COVID. As people started going back to the doctor in 2021, the deductibles and copays starting adding up again, too."

Between the lines: Employers' health spending rose significantly, as well — private businesses' outlays grew by 6.5% in 2021 after a 2.9% decline in 2020.

• Three-quarters of this spending was on premium contributions to employer-sponsored health plans.

The intrigue: Retail prescription drug spending last year also saw a sizable bump compared to 2020 as well as pre-pandemic years, growing by 7.8%.

• Generic drugs still accounted for the vast majority of total prescriptions but accounted for only 16% of drug spending — down from 20% in 2017.

The bottom line: Out-of-pocket and employer health spending are huge trends that will influence the politics of health care, and neither are going in a good direction.

• When people can't afford their care — or when local businesses are bleeding money — is when they make the most noise and create pressure for a policy response.