Health Spending So Far in 2018

By December 6, 2018 Commentary

Time to check in again on our friends from the Altarum Institute, who track and analyze national health spending trends.   (Altarum Briefs)   Through September of this year, US health spending was $3.7 trillion (yow, that’s a lot of money), or 4.8% more than for the same period in 2017.  Now here is some slightly good news, nominal GDP actually grew faster, at 5.2%.  Theoretically that means that health spending shrank slightly as a share of GDP.  That hasn’t happened for a while.  But since December 2007, real health spending has risen by 32.8% while real GDP has only grown 18.6%.  All categories of health spending have grown in 2018.  Hospital spending so far in 2018 is $1.19 trillion, or 32% of all health costs, physician services are $741 billion, or 20%, drug spending was $362 billion or 105 and nursing and home health were $285 billion or 8%.  Personal health expenditures are 85% of all health expenditures; the remainder are public health, research, construction and private insurance administration and profits.  Nursing home costs rose fastest over the last 12 months with 5.7% growth, hospital care increased slowest, at 3.8%.  Physician services also had over 5% growth and for the past two years, have had the highest total increase.

Health prices have been on a relatively stable trend of growth between 1% and 2%.  In October they were 1.3% higher than in October 2017.  Hospital prices increased at that same rate, which physician and clinical services prices grew .8% and drug prices also rose at that rate.  By comparison, CPI was up 2.5% year over year.  Implicit in the spending and price data is utilization increasing at a 2.2% annual rate.  Health care price increases can be fairly volatile month to month, but have a stabler long-term trend.  Since December 2007, health care prices have grown about 3 percentage points faster than general inflation.  Private payers continue to generally experience higher price growth than do the Medicare or Medicaid.  Since June 2014, hospital prices for Medicaid declined .4%, those for Medicare rose 5% and private insurance saw price increases of 10.3%.  Relative stability is the notable feature of health spending, pricing and utilization.  While high and painful for many consumers, at least we aren’t seeing the kind of price and spending growth of earlier decades.

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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