Friday, June 13, 2014

Chart and GraphThis week, we are releasing our monthly briefs on health care employment and prices but have decided to delay the spending brief. We will wait until the end of the month, when our source data from the Bureau of Economic Analysis (BEA) are updated through May. Importantly, these BEA data will incorporate the just-released Quarterly Services Survey (QSS) that cover the first 3 months of 2014. In effect, we will skip the current spending brief (which includes data through April) and provide an early release of next month’s brief (with data through May).

Having reviewed the QSS data, we anticipate a major downward revision to the BEA estimates for health spending in the first quarter of 2014. Because BEA is a key source for our estimates, we know that our next release will show much lower spending growth than what would be shown in our current brief (and has already been shown in our May version). Under these circumstances, it makes no sense to release the current version.

Those of you who read our blog from last month understand that we have been puzzling over the acceleration shown in the source data and have been eagerly awaiting the QSS results for the first quarter of 2014. Here is an excerpt from that blog:

Is the acceleration in spending real or will subsequent data revisions show slower growth? I am becoming quite conflicted over this issue. On the one hand, the pattern in our data is very much in line with expectations. The timing seems about right for a bounce back from the effects of the recession (late 2013) and then there is the additional jump in early 2014 attributable to the newly insured. However, the continuation of very low health care price inflation through April 2014 (1%) means that the acceleration in spending must be driven by utilization. While there are no formal sources of current monthly health care utilization, most of what you hear tends to be about stagnant utilization rather than growth. Furthermore, there has been no acceleration in health employment. My colleague Ani Turner has noted that ACA expanded coverage could drive spending up without any change in prices or utilization—just a shift from uncompensated care to compensated care. And there is some evidence of utilization growth in states expanding Medicaid coverage. So I guess the jury is still out. BEA estimates for Q1 will be updated in mid-June with data from the quarterly services survey. The date has been marked in our calendar!

The big surprise from QSS is an actual deceleration in spending in the first quarter of 2014. Compared with the first quarter of 2013, QSS spending shows a growth rate of 2.9%. In contrast, QSS for the fourth quarter of 2013 was 4.9% higher than for the fourth quarter of 2012. For the third quarter, the growth rate was 3.9%. In fact, spending went negative from the fourth quarter of 2013 to the first quarter of 2014 at a rate of -1.8%. (Adjusting for health care price increases to reflect real spending growth would make this number even more negative; it would also be slightly more positive if adjusted for seasonal factors.)

The BEA data that drove our previous reports of first quarter spending acceleration included estimates of a significant impact of expanded insurance coverage under the Patient Protection and Affordable Care Act. Given that BEA had few data and no historical precedent for these estimates, they were subject to possible subsequent revision on release of the new QSS data; these new data suggest that a significant downward revision is likely. Because much of the enrollment in the new insurance exchanges occurred near the end of the first quarter, it is possible that the impact of expanded coverage will not be felt until the second quarter. Our just-released employment brief for May data shows a jump in employment that might indicate such second quarter spending growth, although these employment data tend to be volatile. Stay tuned as we and others continue to try to interpret the emerging data. In particular, we have assembled an all-star cast for our annual symposium in Washington, DC, on July 15. Hope to see you there!

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