Traditional Medicare spending dropped almost 6% in 2020

Medicare spending declined across most — but not all — types of services, in 2020. That’s because a smaller share of beneficiaries used most types of Medicare-covered health care services in 2020 compared to 2019.

A new analysis by the Kaiser Family Foundation (KFF) found that total spending on Part A and Part B services for traditional Medicare beneficiaries was $348.0 billion in 2020, a decrease of 5.8% (or $21.4 billion) from 2019.

The analysis used data from the Centers for Medicare & Medicaid Services (CMS) to examine trends in spending and utilization by type of health care service between 2010 and 2020 for Medicare beneficiaries who were enrolled in both Part A and Part B of traditional Medicare. Understanding how spending and utilization changed across different types of services in 2020 is useful for identifying areas where beneficiaries delayed or skipped care in response to the pandemic, according to KFF officials — which could have longer-term implications for health outcomes and Medicare spending.

The analysis also found that spending per traditional Medicare beneficiary for Part A and Part B services fell 3.6% ($402) to $10,739 per person in 2020, compared to $11,142 per person in 2019.

The decline in traditional Medicare spending reflects decreases in spending for most types of services, ranging from 0.1% less for durable medical equipment to 13.1% less for procedures, compared to 2019. Only spending on skilled nursing facilities, Part B drugs, and hospice increased in 2020.

On the other hand, average spending per user increased for 12 of the 17 categories. In dollar terms, the largest increases were for long-term care hospitals (+$4,364, 10.2%), skilled nursing facilities (+$2,724, 16.3%), inpatient rehabilitation facilities (+$2,269, 9.7%), and inpatient hospital (+$1,825, 8.5%). These increases indicate that the beneficiaries who used inpatient hospital and post-acute care services in 2020 required more intensive, and therefore costly, care than beneficiaries who used these services in 2019.

“It is not yet known the extent to which the decline in use across most types of health care services may have affected health outcomes of traditional Medicare beneficiaries,” KFF officials noted in their analysis.

“The Medicare population is at risk of having negative effects from delaying or forgoing care because they have relatively high health needs. More than one-fifth of Medicare beneficiaries have five or more chronic conditions and almost one-third have at least one functional impairment. It is possible that the decline in use could have negative implications for future health if people delayed routine care and screenings or were unable to schedule procedures in a timely manner, missing the opportunity for early diagnosis and treatment.”

Researchers added that the sharp decline in health care services in 2020 “did not necessarily translate into a loss of revenue for most providers because of policies adopted by Congress, states, and both the Trump and Biden Administrations.” As an example, they cited the Provider Relief Fund, which authorized $178 billion in funding to compensate providers for lost revenue and unexpected pandemic-related costs.