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Health Care Spending and Inflation

By August 7, 2023Commentary

I post on this topic regularly because health care is almost 20% of the entire US economy so it has an outsized impact on spending and inflation.  It is also majority paid for by governments and is a critical component in the deficit spending binge.  The Altarum Institute’s regular briefs are a good way to track spending and inflation in the health care sector.  The latest versions, published in mid-July and covering the period through the end of May, show continued high growth in spending, at 6% year-over-year, although nominal GDP rose at a slightly faster rate of 6.5% in the same period.  Total health care spending reached an astounding annualized $4.7 trillion.  Health care spending includes both health care received by individuals and spending on research and public health.  Personal health care spending rose at a faster 9.3% clip year-over-year.  Nursing home spending increased fastest at 12.75, home health care at 12.2%, hospital at 9.8% and physician and clinical services at 8.2%.  Of the 9.3% spending rise, 6.1% was utilization increases and the remainder price growth.

On the price side, the data goes through June, but caution should be exercised because Altarum apparently bases its measure of health care inflation on the goofy Bureau of Labor Statistics data, which almost certainly underestimates medical inflation.  The price rise was supposedly 2.8% year-over-year in June; a decline from the 3.2% in May.  For 2023 YTD, the increase is 2.9%.  Nursing homes saw the largest price rise at 6.2%, while doctor prices grew only .6% year-over-year, which is simply not credible.  As you would expect, private insurers are experiencing the greatest level of price increases.  The increases in spending and prices for nursing homes and home health care are likely reflections of the very difficult labor market in these sectors.   (Altarum Briefs)

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