COVID's Impact on Medicare Spending
Published February 2026 · 10 min read
The COVID Shock
Medicare payments dropped -10.0% in 2020 — a $9.0B decline as elective procedures were postponed and patients avoided healthcare facilities.
The Unprecedented Dip
For the first time in the history of Medicare, total provider payments declined in 2020. This wasn't because healthcare got cheaper — it was because millions of Americans simply stopped going to the doctor. Elective surgeries were postponed. Routine screenings were skipped. Outpatient visits plummeted.
The data tells a stark story: from $89.5B in 2019 to $80.5B in 2020. Then a sharp recovery to $91.5B in 2021 as the healthcare system bounced back — and then some.
Winners and Losers
Not all specialties were affected equally. Surgical specialties saw the steepest declines — orthopedic surgeons, ophthalmologists, and cardiologists who depend on elective procedures took the biggest hit. Meanwhile, telehealth-compatible specialties like psychiatry and primary care adapted faster.
COVID testing itself became a massive new spending category. Codes like U0003, U0004, and U0005 (COVID-19 testing) appeared out of nowhere in 2020 and generated billions in Medicare payments by 2021-2022.
The Bounce-Back
By 2021, Medicare spending not only recovered but exceeded pre-pandemic levels. This "revenge healthcare" phenomenon — patients catching up on deferred procedures — drove a surge that continued through 2023. The question now is whether spending has permanently shifted to a higher trajectory.