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Altarum Health Sector Trend Report

By August 6, 2018Commentary

Using several sources the Altarum Institute’s Center for Sustainable Health Spending produces regular reports analyzing trends in national health spending, including by its components of utilization and prices.  The June Health Trend Report gives us a sense of what is happening so far in 2018.    (Altarum Report)   According to the report, US health spending rose by 4.8% in the first quarter of 2018, compared to the 1st quarter of 2017.  That is a slight increase from the growth rates reported for similar periods in 2017 and 2016.  Spending on health care services, which is over 70% of total health expenditures (which also covered administrative costs, research, public health spending, etc.), rose by 4.5% in Q1 2018.  Prescription drug costs, which have been a volatile, but growing part of total health spending, rose by 3.9% in the first quarter, a lower growth rate than in recent periods.  The utilization component of health spending grew by 2.3%, which also is a lower increase than the last few years, and may be linked to declines in coverage.  Health prices, on the other hand, have shown an increasing trend, up 2.3% and now accounting for half the total rise in health spending.  The number of jobs added in the health care sector, which can reflect demand for services and is linked to health spending, was consistent with prior quarters, at around 80,000.  When utilization rises faster than jobs, it suggests some productivity gains, which is as important for health care as for any other industry, perhaps more important as health care is so labor intensive.  As the economy continues to be strong, possibly even strengthening, we should be alert for signs that health spending increases, which never seem to come down to the rate of economic growth, are accelerating.  Price is a particular concern and early 2018 suggests some greater upward movement in that component.  It should be a high priority national goal to get health spending below the rate of economic growth and keep it there.  That can be done, but would require some pain for particular companies, like the drug industry and massive health systems, both of which are largely responsible for excessive spending.

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