January 12, 2018
Ann Arbor, MI — U.S. health sector spending continues to grow at a more sustainable rate, driven in part by a slowdown in hiring, hospital spending, and price growth in hospitals, physician and clinical services, and prescription drugs, according to Altarum’s latest Health Sector Economic Indicators briefs.
These factors, combined with an expanding economy, account for the health care sector holding steady at 18.0% of GDP in November. This rate has not exceeded 18.1% since February 2016.
Key highlights from the briefs include:
Health Care Spending
At $3.56 trillion (seasonally adjusted annual rate), national health spending in November 2017 was 4.5% higher than health spending in November 2016. Year-over-year spending increased in all major categories, with spending on physician and clinical services growing the fastest, at 5.2%, and spending on hospital care the lowest, at 2.9%. A temporary increase in spending growth is likely in the coming months, given the elevated level of influenza activity that has been observed thus far in the season.
“The health spending rate of 4.5% in November is a bit faster than the 4.3% growth experienced in 2016, but we would not be surprised to see this eventually revised downward, says Dr. Charles Roehrig, senior economist and fellow at Altarum. “One reason is the 5.0% growth we show in prescription drug spending for 2017 does not account for possible changes in the growth of manufacturer rebates. Adjusting for rebates caused a large downward revision in 2016 and could do so again in 2017.”
Health Care Employment
In December 2017, health care added 31,400 new jobs, mostly in ambulatory settings which added 14,800 jobs. Hospitals have added a robust 12,400 jobs in December, jumping back from a revised November estimate of only 800 new jobs. Although declining, year-over-year health job growth is still higher than the 1.4% growth in nonhealth jobs, causing the health share of total jobs to increase during 2017, from 10.73% in January to the current all-time high of 10.78% in December.
“One of the many reasons to expect 2017 growth in health spending to be revised downward toward the 2016 growth rate is that average monthly health job growth in 2017 is running about 20% below that of 2016 and changes in job growth often indicate changes in spending growth,” says Roehrig.
Health Care Prices
In November 2017, the Medical Consumer Price Index (MCPI) grew, but at a low rate of 1.7%, only one-tenth above the multi-decade low of 1.6% observed in September. In contrast, growth in the final-demand Producer Price Index (PPI) has spiked at 3.1% in November, the highest rate since January 2012.
Across all payers, year-over-year hospital price growth, and physician and clinical services growth in November remain very low, at 1.5% and 0.6%, respectively. Annual price growth for other professional services and for prescription drugs, each at 2.2%, were the fastest growing categories in November 2017.
View Reports: January 2018 Health Sector Economic Indicators Briefs