Healthcare Spending Up 5.5%


At a $3.4 trillion annual rate, national health spending in August 2016 was 5.5% higher than health spending in August 2015, according to a press release from Altarum Institute, a provider of systems-based solutions for healthcare.

Annualized growth for the first 8 months of 2016 is now 5.6%, revised upward due to the September Quarterly Services Survey (QSS) which showed unexpectedly high growth in spending on health care services in the second quarter. Spending on prescription drugs grew by only 4.3% in August, despite higher growth in prescription drug prices.

In August 2016, healthcare prices were 1.9% higher than in August 2015. While only a 0.2 increase from July, prices are at their highest rate since October 2012. After hitting the December 2015 all-time low of 0.9%, price growth has roughly doubled, and is on the cusp of rising to a more “normal” 2% rate—or higher. Yet, the two principal price components, hospitals and physicians, are growing remarkably slowly: 0.9% for the former and only 0.1% for the latter. At 6.3% growth, prescription drug prices are at their highest level since December 2014.

Healthcare added 32,700 jobs in September, less than the 12-month average of 37,000 jobs, but up from last month’s low August reading of 22,000. Hospital hiring grew by 7,000 jobs compared to its 12-month average of 13,000. Health jobs grew 2.9% year over year while non-health jobs grew 1.6%, causing the health share of total employment to reach a new all-time high of 10.8%.

These data come from the monthly Health Sector Economic Indicators briefs released by Altarum Institute’s Center for Sustainable Health Spending.

“We have expected health spending growth to slow in 2016 in response to the slowdown in expanded coverage,” said Charles Roehrig, founding director of the Center. “However, the September QSS suggests that spending on health care services in the first half of 2016 has been growing at about the same rate as in 2015. It took a while for expanded coverage to push spending up, so perhaps we must wait a while longer for the slowdown in expanded coverage to be reflected in slower spending growth. We await QSS data for the third quarter which will be released on Dec. 8.”


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