The Latest Altarum Institute Perspective on Health Spending Trends

The Altarum Institute’s Center for Sustainable Health Spending issues monthly briefs on health care spending and prices and quarterly reports that use additional sources of government data to analyze spending year-to-date and update forecasts.  The latest Health Sector Trend report, issued in September, suggests that earlier projections underestimated likely national health spending for 2016.    (Altarum Brief)   The report finds that spending grew 6.5% year-over-year in the second quarter of 2016 and 6% for the entire first half of the year, which is significantly above the CMS projection of 4.8% national health spending increases for 2016.  Altarum had projected that spending would slow as the coverage expansion created by the reform law leveled off and the new enrollees were fully absorbed.  This does not appear to be the case.  Much of the rise is driven by a jump in health services spending to 7% in the second quarter.  And somewhat surprisingly, the increase is largely driven by more utilization, as health prices rose only about 1%.  Physician and clinical services spending increased 8.3% in Q2, the highest rate in over ten years.  And hospital spending growth similarly accelerated to about 6.7%, while prescription drug costs were relatively muted at 5.5% more spending.  Looking at the trend for the last several years, utilization has become responsible for the vast bulk of spending increases, a reversal from the dominance of price increases in prior periods.  The continued rise of utilization, despite the leveling off of coverage expansions, suggest either greater illness burden or pent-up demand.  While there might be some seasonal component to utilization due to high-deductible plans, that should show up in the fourth quarter, not the second.  Some fear should be induced by the very moderate price growth.  Sooner or later physicians and hospitals are going to insist on higher reimbursements, even from government programs.  This Altarum report, coupled with other research, suggests ongoing pain from health spending; pain that is increasing with little relief in sight.