July 26, 2018

ANN ARBOR, MI—A new Altarum research brief estimates private versus public health spending on a timely basis and finds that:

  • Spending and price growth among the privately-insured population accelerated in 2017 and early 2018 relative to Medicare and Medicaid, despite very low growth in private insurance enrollment. This reverses the trend seen from 2009 through 2016, when private spending growth was near or below Medicare and Medicaid rates.
  • Since the start of the economic recovery in 2009, total Medicaid spending has grown by 72.6%—more than Medicare (50.7%) and private payer spending (49.4%)—largely due to increases in enrollment, although Medicaid spending has slowed significantly, averaging only 2.3% since January 2017.
  • On a per enrollee basis, private payer spending has grown 45.9% since 2009, three times the rate of Medicare and Medicaid per enrollee spending.

In conjunction with this brief, Altarum is also releasing its monthly Health Sector Economic Indicators for July. Highlights include:

  • At 17.77%, national health spending in May 2018 represents the lowest contribution to GDP since October 2015. This is largely attributable to recent growth in GDP, which grew by 5.6% since May 2017. Similarly, April’s GDP year-over-year growth was 5.9%. However, downward revisions to the government’s estimates of hospital and nursing home spending in the first quarter of 2018 have also contributed to this result.
  • Health sector hiring in the first half of 2018 looks much like it did in the last half of 2017. In fact, for the past five quarters, average monthly health sector job growth has averaged 27, 25, 26, 26, and 26 thousand jobs. We have been awaiting “moderation” in health job growth after the increased demand and revenue associated with expanded coverage, but it seems we have already moderated to a steady 2% growth in health employment. This level of growth is consistent with current health spending growth of 4.5% to 5%, and current average wage growth in health care of 2.5% to 3%.
  • In June 2018, the Health Care Price Index (HCPI) rose by 1.9% compared to the previous year, down from 2.3% in April which was the highest rate since January 2012. Very high hospital price growth, especially for Medicare patients, had been driving the HCPI higher but has recently abated. For private pay patients, hospital prices fell from 3.7% annual growth in March to 2.1% in June. The total hospital price growth fell from 3.7% in March to 2.5% in June. While the price growth trend is clearly up as illustrated by economy-wide inflation, there may be moderation in the next few months until the hospital rates settle.

“We are excited to introduce our tracking of public vs. private health care spending trends, and incorporate this data into the monthly Health Sector Economic Indicators. Given the mix of public and private payers in the U.S. who contract for services and set prices independently of each other, tracking combined trends can obscure dynamics that cause the systems to diverge,” says Altarum’s Corwin Rhyan, author of the new brief.

“Disaggregating health care sector trends by payer provides insights for both researchers and policymakers. Since the payers operate under very different policy regimes, the potential levers to control prices and utilization vary greatly between the publicly- and privately-insured populations. Up-to-date data are vital to informing policy. In subsequent months we will refine these estimates and further explore causal factors,” says Rhyan.

Health Care Spending

At $3.62 trillion (seasonally adjusted annual rate), national health spending in May 2018 was 4.4% higher than it was in May 2017. Spending in May 2018, year over year, increased in all major categories. Spending on dental services grew the fastest, at 5.6%. Growth in spending on nursing home care was the slowest, at 1.5%.

Health Care Employment

Health care added 25,200 new jobs in June 2018, consistent with the 12-month average of 25,800 new jobs per month. Hospitals added 10,600 jobs in June, more than the 12-month average of 7,900. Ambulatory settings such as physician offices and home health added 13,500 new jobs, lower than the 12-month average of 17,000.

Health Care Prices

Health care prices in June 2018 rose 1.91% above June 2017. The annual growth rate was 2.1% in May and 2.3% in April. Year-over-year hospital price growth fell from 2.8% in May to 2.5% in June after hitting a high of 3.7% in March. Physician and clinical services price growth fell from 0.5% to 0.4% in June. Annual drug price growth fell to 3.2% in June from 3.7% in May.

Read all three reports at https://altarum.org/our-work/cshs-health-sector-economic-indicators-briefs.

Contact Information
Sarah Litton
Manager, Communications and Public Affairs
202-772-5062
press@altarum.org

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Altarum is a nonprofit organization that creates and implements solutions to advance health among vulnerable and publicly-insured populations.