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Altarum Summaries on Price on Cost Trends

By July 17, 2013Commentary

The Altarum Institute issues regular briefs on health spending and health prices.  The most recent ones go through May of this year.   (Altarum Brief) (Altarum Brief II)   Health price growth remains very subdued, with a one percent increase in May of 2013 over May of 2012.  The 12 month moving average is 1.7%, the lowest since 1998.  Hospital prices grew 1.8%, physician service prices were unchanged and drugs dropped one-tenth of a percent.  The Medical CPI was 2.2%.  All of this price news seems good, but when compared to general inflation, health prices are still rising significantly faster, which means for all affected, and particularly consumers, more of their money is going to health care.  What is clear from the price report is that we are experiencing a welcome respite from high health care price growth, which may be due to general economic weakness, to the ability of governments to dictate prices and to consumers having some greater sensitivity to costs.  Implied utilization growth is also relatively low, probably due to consumer restraint, and this lower demand is likely having an impact on prices.  On the spending side, based on an analysis of national health expenditure data, May of 2013 saw 4.2% growth compared to May of 2012, about 1% higher than GDP growth in the same time period.  On a cumulative basis, since the start of the recession in December 2007, health care spending has increased an aggregate of 13.5%, while cumulative GDP growth in that time has only been 2.9%  Without health care, GDP growth over that period was less than 1%.  In the past year, spending has grown in all categories, with home health showing the fastest growth at 7.2%.  Hospital spending also shows relatively high growth with physician spending increases relatively muted.  So the good news is that spending and price growth is restrained, but since economic growth is also very restrained and historically the two have been highly linked, if and when the economy experiences faster growth, we might expect health spending and prices to also increase more rapidly.

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