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Altarum Price and Spending Data

By July 15, 2014Commentary

On a regular basis the Altarum Institute releases an analysis of current health care price and spending trends.  The latest set, covering May, is of particular interest given that the first quarter downward revision in GDP was largely due to lower health spending, according to the Bureau of Economic Analysis.    (Altarum Briefs)  Unfortunately, the Altarum data rely heavily on the BEA output, so there is little independent confirmation of either the initial projection of rapid health spending growth in the first quarter of this year or the recent sharp downward revision of that growth.  In regard to prices, Altarum finds annual health price inflation from May of 2013 to May of this year of 1.8%, an uptick from April.  Drug prices rose 3.6%, hospital prices increased 2.1% and physician services showed more modest growth.  Since the start of the recession in December 2007 health care prices have increased by 14.4% while overall prices have grown only 9.9%.  By inference from spending and price trends, health care utilization changes can be found.  Utilization is currently rising at an annual per capita rate of 1.7%, led by drug and home health service growth.  Over the last 25 years, utilization and price inflation contributed roughly equally to spending increases, but following the recession, price growth was responsible for the vast majority of spending rises.  Now utilization appears to be contributing again.

Health spending through May 2014 was at an annual rate of $3.02 trillion.  On a year-over-year basis, spending is growing at 4.8% in May.  This rate continues to be higher than GDP growth.  Since the start of the recession real health spending has increased 16%, while the rest of GDP has seen only a 3.8% growth.  You can see the heavy impact health spending has on GDP.  Hospital spending is about 31% of total health spending currently, physician and clinical is 20%, drugs are 10% and nursing home and home health about 8%.  Prescription drug spending grew most rapidly in the last 12 months, at 12.2%.  Home health care also showed rapid increases in spending.  The authors of the brief hypothesize that while we have not yet apparently seen a surge in utilization and spending from the coverage expansions of the reform law, it may take a few months for this to show up in full and at that time we may see more rapid utilization, price and spending growth.

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