National Health Spending Trends

By March 31, 2017Commentary

No matter what is happening at the national policy level, and there is certainly turmoil there, health spending in the United States just continues its upward March, with period of slower growth interspersed with times of acceleration.  The Altarum Institute’s Center for Sustainable Health Spending gives good tracking data through it all.   (Altarum Price Brief)  (Altarum Spending Brief)   As of January 2017, health spending was running at an annualized $3.47 trillion, that’s right, trillion.  That rate of spending is 5.7% than it was in January 2016.  As it has for several years, that is a couple of percentage points higher than the economic growth, so health is eating up more and more of our output.  And while economic growth is maybe increasing, health spending definitely is accelerating over the last few months.  Hospital spending is 32% of the total and its growth rate slowed to 3.6%.  Physician services are 20% and that spending rose 6.6% year-over-year.  Drugs are 10% of spending and grew 6%.  Nursing home spending was rising the fastest in January at 7.9%.  There is substantial variation in growth rates for categories over relatively short time spans.

At a high level, spending can be decomposed into utilization and unit prices.  Over time, those factors contribute differentially to overall spending growth.  In January 2017 prices rose 2.1% over the prior year.  In January 2016 the year-over-year rate of price growth was 1.3% and in January 2015 it was 1.2%, so we do seem to be experiencing more rapid price increases.  The somewhat good news is that health prices don’t seem to be increasing much faster than overall inflation.  Other good news is that hospital and physician price growth is lower than the overall overage, at 1.5% and .5%.  Of course, these increases are almost all in the private sector as Medicare and Medicaid continue in some cases to decrease reimbursements.  Drug price inflation, while lower than in past years, is still quite dramatic at 6.1%.  Utilization is rising at a 3.2% rate on a per capita basis, with hospital use up 3.7%, physician service use rising 5.4% and drug use actually declining .8%.  It is apparent to anyone who looks that we have a spending growth problem.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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