It has been a while since we looked at the Altarum reports on health spending and pricing, so here is a review of their latest analysis of those trends. (Altarum Reports) Altarum has a quarterly Health Sector Trends report and monthly reports on spending, price growth, and jobs. From the spending and price analysis you also get an inference on utilization trends and combining the job and services spending gives you a rough sense of any productivity growth in the health sector. Altarum’s current estimate is that health spending grew 4.7% in 2017 compared to 4.3% in 2016, but that could be adjusted down for drug discounts and rebates, which take longer to flow through the spending accounts. This measure of health spending includes everything, including for example insurance administration costs and profits and public health expenditures. Services and products, or personal health spending, is about 85% of the total, and hospitals represent 32% and doctors 20%, while drugs are 9%. Spending was relatively constant across all of 2017’s quarters. Drug spending is the most volatile component, and can cause swings from quarter to quarter. Administrative costs showed gradual increases over 2017, and hospital spending had a slight decline, while physician spending grew a bit. Health care prices rose about 1.7% for 2017, which actually is a little below economy-wide price growth, and prices were fairly stable for physician and hospital services. This implies that utilization rose about 3%. Productivity, as measured by jobs versus number of services delivered, appears to have risen about 8.8% since 2005, but that may partly be influenced by a reduction in uncompensated care following passage of the ACA and the improvement in the economy.
For January 2018, the most recent spending numbers published by Altarum, spending was 4.8% higher than in January 2017, at a run rate of $3.58 trillion. This is just slightly higher than nominal GDP growth. Home health care had the highest growth rate at 7.7%. On a trailing twelve month basis, physician and clinical services experienced the greatest growth, 6.2%. Increases in hospital and physician spending appear to be declining on a year-over-year basis. The most recent price numbers are from February and showed a 2.2% rise over February 2017, which was the highest growth since 2012, and compares to price growth for all of 2017 of 1.6%. This price increase was driven by hospitals, at 3.8%, the greatest rise since 2009, while physician prices rose only .3%. The hospital increase surprisingly was largely from Medicare and Medicaid payments and also likely reflects concerns over falling margins and greater market power. Per capita utilization appears to have risen a more moderate 1.8% on a year-over-year basis. Overall the reports suggest that spending has not accelerated, but prices in particular bear close watching to identify a clearer 2018 spending trend.