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Update on Health Spending and Inflation

By February 5, 2024Commentary

Time for one of our periodic updates on health spending and health prices.  In November 2023, health spending grew at a 5.9% rate while the economy rose 5% year-over-year.  Health care spending has begun to increase faster than economic growth and I expect that trend to continue.  Personal health spending, which represents health care received by individuals and is the vast majority of all health care spending, rose at a 7.3% rate.  Public health spending is slowing post-epidemic.  Home health care had a 12.9% year-over-year rise, while prescription drug spending rose 12.2%.  Dental care spending growth was slowest at 5.8% YOY and hospital spending rose 5.9%.  Of the 7.3% increase in personal health spending, 3 percentage points were due to price rises and the rest, 4.3 percentage points, was attributable to utilization.

Health prices in December 2023 increased at about 3% year-over-year, consistent with most of 2023.  This is consistent with overall inflation, but health prices have not declined with economy-wide prices.  Dental, home health care and nursing home prices rose at the greatest rate, while physician prices increased most slowly.  Physician prices will be rising rapidly soon, there is too much pent-up cost increases for running a physician practice.  Medicare in particular has seen restrained price growth but political pressure is being exerted to change that.  Health inflation is currently above general inflation and I expect that gap to grow.  Not good for consumers.  (Altarum Briefs)

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