Latest Altarum Spending and Price Reports

We have been closely following the Altarum Institute analyses, based on Department of Labor data and other sources, of health care spending and health care services and goods inflation.  The September reports offer data through July for spending and through August for prices.  (Altarum Reports)  While spending and price increases have been widely anticipated as a result of reform and improved economic conditions, those have yet to be reflected in the data.  In the twelve months ending in July 2014, total health spending grew at an estimated 4.3%, about the same as GDP growth in that period.  The YTD increase is about 4.4%.  Since before the recession, health spending has grown at a real rate of 15.8%, while the rest of the economy, without health spending, has only increased 7%.  Health spending is now 17.3% of GDP.  By category, spending continues to grow most rapidly for prescription drugs, at 11%.  Hospital and physician spending, the largest categories, show muted increases, at 2.1% and 3.2% respectively.  Home health spending showed a large drop from 2013 trailing twelve month growth rates.

The pricing analyses also indicates moderate inflation.  The August 2014 growth was 1.7% from August 2013 and the 12 month moving average was 1.4%.  This suggest utilization growth is 2.7% (the 4.3% July overall spending growth minus the July price component of 1.6%).  Hospital prices grew 1.7% and physician and other office services by .8%, which was a sharp acceleration from July.  Drug prices rose 3.6%, as they continue to be a major contributor to inflation.  Economy wide, the CPI was 1.7%, medical CPI was 2.1% and the GDP deflator was 1.5%, so health prices are not growing markedly faster than other prices.  However, since December 2007 health inflation is 14.7% compared to 10.5% for general inflation.  Medicare and Medicaid prices are rising slower than commercial ones.  Altarum anticipates that continued growth in coverage will lead to higher spending rates, but the heavy cost-sharing in commercial policies may mute that trend.