Sluggish Hospital Spending Continues to Restrain Growth in Overall Health Spending

November 09, 2017

Ann Arbor, MI — Total health spending growth in September was 4.3% higher compared to a year earlier primarily due to slow growth in hospital spending, according to Altarum’s latest Health Sector Economic Indicators Briefs.

In addition, health care price growth approached a historic low, rising at a 1.1% annual growth rate compared to a year earlier, its lowest growth since the all-time low of 0.9% in December 2015. Health care job growth also remained modest, with 21,500 new jobs added in October 2017, less than the 2017 monthly average of 25,000.

These trends toward slower growth may reflect the continuing shift in the delivery of care from inpatient to outpatient settings and in hospitals’ ongoing efforts to control increasing costs.

“As we move into the fourth quarter of 2017, we are on track for about 4.5% growth in health spending for the full year,” said Charles Roehrig, founding director of Altarum’s Center for Sustainable Health Spending.

Despite the modest growth, “it has improved considerably when compared to GDP growth, which averaged 2.8% in 2016 and jumped to 4.0% for 2017 to date,” said Roehrig. “Toward the end of this month, look for our November Trend Report which will include revisions to third quarter growth based upon the Advance QSS data release scheduled for November 17.”

Health Care Spending

At $3.53 trillion (seasonally adjusted annual rate), national health spending in September 2017 was 4.3% higher than health spending in September 2016. Year-over-year spending increased in all major categories, with spending on dental services growing the fastest, at 6.0%, and spending on hospital care the lowest, at 1.9%. This hospital spending growth rate is the lowest since September 2011 when it was 1.8%. Health spending as a percent of GDP is estimated at 18.0% for September, equal to the August rate.

Health Care Employment

Health jobs growth continues to slow at a modest rate in October 2017. Year-over-year health jobs growth began 2017 at 2.4%, and this month dropped below 2.0% for the first time since 2014. The health care share of totally employment remains at 10.77%, an all-time high. Most of the slowdown is in hospitals, which are predicted to add about half as many jobs this year as in the previous 2 years—averaging 5,000 new jobs per month versus 10,000 to 11,000 new jobs per month.

Health Care Prices

In September 2017, Health Care Price Index (HCPI) rose by 1.1% compared to a year earlier, its lowest growth since the all-time low of 0.9% in December 2015—largely impacted by health policy uncertainty and structural health sector changes. While the annual price growth for other professional services, at 2.3%, was the fastest growing category, the price growth for prescription drugs plummeted to 1.4% from 2.7% in August.

View Reports: November 2017 Health Sector Economic Indicators Briefs

Altarum is a nonprofit organization that works with federal and state agencies and foundations to design and implement solutions to improve the health of individuals with fewer financial resources and populations disenfranchised by the health care system. We achieve measurable results by combining our expertise in public health and health care delivery with technology, workforce training and continuing education, applied research, and technical assistance. Our innovative solutions lead to better health for beneficiaries and better value for payers.