Latest Altarum Health Sector Spending Report

By October 11, 2018Commentary

Every now and then I like to check in on the good people at the Alarum Institute’s Center for Value in Health Care (recently renamed) to see their analysis of national health spending, utilization and job growth.  The second quarter Health Sector Trend Report was recently released.   (Altarum Report)   In the second quarter of 2018, health spending rose 5% compared to the year earlier period and for the first half of 2018, the increase was 4.8%.  For about two years now health spending increases have been in the 4.3% to 4.8% range.  Health services account for 70% of all health spending and that category rose by 4.9% in the second quarter, year-over-year.  Prescription drugs are about 10% of total spending, and grew by a more modest 3.4%.  Different payer types–Medicare, Medicaid and private–have experienced different growth rates.  Medicare has been the steadiest, consistently falling between 4.3% and 4.9% for the last eight years.  Medicaid has shown the most volatile shifts, probably due to an enrollment influx after implementation of the reform law.  That program’s growth rate was as high as 11.5% in 2014, but has since ameliorated to be more similar the overall trend.  Growth in that program could slow as employment continues to rise.

Private payers in the last four years have experienced the sharpest growth rates, at over 6% for the last two years.  This is due to both faster rises in prices and more utilization.  On a per capita basis the difference between spending increase rates for private payers and public ones becomes even clearer.  Medicare per beneficiary growth is consistently around 2%, Medicaid’s rate is volatile, ranging from a decline in per member spending of almost 2% to an increase of around 5%, and private payers have experienced per member spending growth of over 6% in recent years.  On a cumulative basis, per person spending since 2009 has grown over 50% for private insurance compared to around 15% for both Medicare and Medicaid.  Health care price growth was around 2% for the first half of 2018, but again, private payers are seeing much more rapid price increases and public ones see little change, since they set the price.  Health sector employment growth is steady at around 2%, since utilization is growing a little above that rate, there is an implication of some productivity rises.  And once again, for the hundredth time, let me point out that health spending especially in the private sector which affects the most people, is growing faster than the economy or personal income.

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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