Latest Altarum Report on Spending

In 2014 many of us expected to see an acceleration of health spending growth, in part due to the coverage expansion caused by the reform law and in part by pent-up provider demand for higher payments.  In the first part of the year the acceleration did not occur, but there are indications in the latest Altarum reports on health spending and prices that it may be beginning.   (Altarum Report)  The reports are through November 2014.  National health spending on a year-over-year basis grew 5.1%, increasing in all categories, with prescription drug growth, not surprisingly given the introduction of the Hep C and other specialty medications, growing the fastest, at 10.9%.  Hospital spending, which in the last decade has the major source of spending increases, rose 5.9%, a troubling re-emergence.   Although GDP growth also rose in the third quarter, and in the trailing twelve months was 3.7%, health spending’s rate of rise has begun to widen over that of the general economy.  The first 11 months of 2014 show an annualized growth rate of 5%.

Prices were 1.6% higher in November 2014 than in November 2013.  Drug prices rose 4.6%, hospital ones 1.1% and physician .6% in this period.  Hospital price growth is concentrated among private health plans, with Medicare and Medicaid showing lower increases.  Health care utilization rose an implied 3.1%, or 2.4% on a per capita basis.  The moving average of overall health prices is at 1.5% but has risen for 8 straight months.  The increase in utilization, if sustained or trending even higher, would like imply greater pressure for higher pricing as well.  Finally, Altarum also tracks health care jobs data and that information indicates that 50% more of these were added in 2014 than in 2013.  More jobs growth tends to be correlated with higher spending and may even be a leading indicator.  2015 may see even more of a health spending acceleration.