The Altarum Institute regularly analyzes data on health care spending and inflation, which I believe is much higher than official figures show and which have in 2023 and will in 2024 contribute greatly to the average household’s financial pain. The most recently published Altarum data indicates that in August, health spending grew by 5.4% year-over-year. Spending on personal health care, which is by far the largest category and most relevant to households, rose by 7.4%, led by a usual suspect, prescription drugs, where spending increased by 10.8%. Just to give you a sense, the US currently has an annual spend rate on health care of $4.75 trillion. That is stupifying.
Of the 7.4% increase in personal health care spending, 2.8 percentage points were attributed to price increases and 4.6 percentage points to increased utilization. I will again question that inflation number and I am sure that given labor and other cost pressures on providers, they will be much higher in coming months. According to Altarum health care inflation was only 2.8% year-over-year in August. Prices for home health care, nursing care (home health and nursing homes have serious labor shortages and labor cost pressures) and dental care rose the fastest at around 6% each, while physician prices advanced the slowest. The low rise in physician prices is not sustainable. Somewhat surprisingly Medicaid prices showed the greatest increase at 4.2%, likely due to difficulty in getting providers to deliver services to people covered by that program, followed by private insurance at 2.9% and Medicare at 1.5%. Utilization grow slowed a bid at 4%, likely due to people having caught up on a lot of the missed care during the epidemic and CV-19 utilization largely disappearing. (Altarum Reports)
I still anticipate much higher provider prices, particularly for private insurers, in 2024 and a much greater contribution of health care to inflation. And lots of pain for middle-income persons as they shoulder the increased costs.