Early Spring Altarum Update on Health Spending and Inflation

Keeping a close eye on these as I believe they give an early picture of health inflation trends.  The other thing I keep watching is the increasing number of very bitter fights between providers and payers over reimbursement and the intense lobbying in Congress to pay providers more for Medicare.  The first look at spending for 2023 finds that personal health care spending, which includes the health care services that we actually care about, grew at a 7.7% year-over-year rate, while GDP was increasing 6.3%.  Public health spending is declining in the wake of the epidemic so personal health care spending, which accounts for 84% of all health care spending, is the important thing to watch.  Spending on prescription drugs, home health care and nursing home care rose the fastest, and hospital spending the slowest, although this largest single category of care still rose 7.1% YOY.

Supposedly utilization increases account for 4.4 of the percentage points in the total increase, while price represents 2.9 percentage points.  I am dubious because utilization is calculated by subtracting price from the total and the most methods undercount price inflation in health care.  Health care prices grew by 2.8% in January according to this method, while the overall CPI rose 3.1%.  I suspect health care prices are in fact rising substantially faster.  For example, this brief says drug prices only rose one-tenth of a % in January, which is absurd in light of a number of articles and studies noting substantial price increases on common drugs at the start of the year, as there always are.  The brief itself notes that the BEA calculation for medical CPI rose 3.8%, which I still believe to be an undercount.  In terms of utilization, prescriptions, home health care and physician service use all rose the fastest.  Stay tuned.   (Altarum Briefs)