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Latest Altarum Institute Health Spending Reports

By November 9, 2017Commentary

It has been a while since we checked in on the Altarum reports which track health care prices, utilization and spending trends.  In October the firm released its latest Health Sector Trend Report.   (Altarum Reports)   Health spending growth through August 2017 was 4.7% year-over-year, a range it has stayed in all year and consistent with year-over-year growth of 4.6% in 2016.  Health care services growth, however, appears to be decelerating, with 4.9% growth in 2016 compared to 4.5% in the first half of 2016, and a 4.1% increase in August of 2017.  This sector includes physician and hospital services.  Prescription drug spending rises also seem to be slowing, with 5% growth in 2016 compared to 3.9% in August.  On the other hand, the cost of administration and profits is rising rapidly, from 3.4% in 2016 to a projected 7.9% in 2017.  Much of the slowdown in spending is due to muted price growth, which was 2.2% year-over-year in the fourth quarter of 2016 and is 1.3% in the third quarter of 2017.  Both physician and hospital price rises have been very slow, in the 1% range, while even drug price increases have slowed, from 6.4% in 2016’s fourth quarter to 2.8% in 2017 Q4.  Other Altarum briefs suggest that utilization rises have also been contained, although they are disproportionately accounting for the spending growth.  This is very good news for companies and the overall economy.  While the rate of health care spending is above that of general economic growth, any reduction is helpful.  It is unclear if there are specific tactics which are helping with this moderation of growth, but the pressure needs to be maintained, especially on the price front.

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