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The Latest Altarum Health Sector Trend Report

By January 6, 2017Commentary

The Altarum Institute’s Center for Sustainable Health Spending issues monthly health spending and price briefs and a quarterly Health Sector Trend Report.  The recently released Q3 2016 report indicates continued moderate, but much higher than GDP, growth in health spending.   (Altarum Report)   About 71% of national health spending is for services and 13.5% for products, like drugs and devices.  The rest is the net cost of insurance and administration and public health and research.  The report estimates that health spending on services and goods rose 5.4% in the third quarter, basically stable over the course of 2016 and suggesting that growth for the full year will be in this vicinity.  One notable trend is the decline in the rate of prescription drug spending growth.  That rate was 4.2% in Q3, continuing a steep fall from double-digit rates in late 2014 and early 2015.  Drug prices, however, continued their ascent, rising 5.9% compared to overall 1.2% price increases for health care.  This implies that fewer drugs are being used, which may actually reflect the higher prices and higher resulting cost-sharing for patients.

Looked at by provider category, hospitals are about 32% of spending, physician and other clinical services around 20%, drugs 10%, and net cost of insurance is 6.6%.  So growth in hospital and physician utilization and prices are particularly worthy of attention.  Both components are showing growth rates around the total average, which is what you would expect given their weighting.  Since 2014, hospital spending has risen 5.7% annually on average and physician services 5.2%.  Overall, utilization is contributing more to this increase than are prices.  Price growth for services remains in the 2% range, while utilization increases are running over 3%.  The muted provider price rises are somewhat misleading, however, as Medicare and Medicaid by fiat have restrained any increases, while the commercial sector has experienced much more substantial growth in prices.

CMS’ actuaries projected a 4.8% growth rate in national health spending for 2016.  That looks to miss by over half a percent.  And with GDP running at about a 2% growth rate and personal income rises in the same ballpark, it continues to be an ugly picture for consumers, who one way or another pay for most of this health care spending.

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