The Latest Altarum Institute Spending and Price Briefs

By April 5, 2019 Commentary

Once more into the breach with the Altarum Institute regular reports on health spending and pricing.   (Altarum Reports)   The big picture first, according to the Altarum estimates, national health spending grew by 4.6% in 2018.  (That is the nominal or full increase, not adjusted for inflation)  this compares to 3.5% in 2017 and 5.3% in 2016.  It was $3.73 trillion.  That is a lot of money and a huge part of our economy.  In real (constant dollar) terms, over the last ten years health spending rose 33% and GDP 19%, which explains the preoccupation with controlling spending.  By category, hospital is 32% of spending, physician and clinical services 20%, drugs 10% and nursing home and home health 8%.  Personal health spending is 85% of the total, the rest is administrative costs, public spending, research and construction.  Among the categories, home health grew fastest, 5.0%, while drug spending was the slowest riser, .3%.  Drug, nursing home and physician services showed a significant drop in growth from 2017, when all categories had relatively even spending rises.

Turning now to pricing, in February on a year-over-year basis they rose 1.3%, a relatively low rate.  Hospital prices grew 1.9% year-over-year, while physician ones were up .7%.  Drug pricing actually declined 1.2%, the lowest rate in over 45 years!!  This is due to a temporary slowdown in new branded drug introductions and shouldn’t be expected to last long.  Health prices are still growing significantly faster than economy-wide prices.  And private payers are seeing much higher price increases than are the government programs like Medicare and Medicaid.  The good news is that prices really have not shown substantial acceleration for several years and spikes tend to be short-lived.  Subtracting the price contribution from spending increases implies that utilization is rising about 2.3% in February.  Per-capita year-over-year utilization grew about 2.5% in 2018, the best way to measure that statistic.  There also has not been significant acceleration in this factor.  Overall, we should be concerned about health spending, but not alarmed that we are seeing sudden acceleration.

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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