Spending: Health spending growth declines for the first time in 6 months. January 2020 cooling after acceleration at the end of 2019.
- At $3.94 trillion (seasonally adjusted annual rate), national health spending in January 2020 was 5.3% higher than in January 2019. This spending rate puts us $60 billion away from hitting $4 trillion.
- After 5 months of health spending acceleration to 5.7% in December 2019, year-over-year spending growth in January 2020 dropped to 5.3%. Hospital spending growth, which led the acceleration for 4 of the 5 previous months, dropped from 6.6% in December to 5.7% in January. As in December, health spending slightly exceeding 18% of GDP for the first time since May 2016.
- Spending in January 2020, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 10.1%. Growth in spending on dental services was the slowest, at 3.4%.
- We will be closely watching in coming months for an impact of the COVID-19 pandemic on health care spending.
Labor: Continued steady health care job growth in the first two months of 2020. Continuing aggressive hiring may now be a function of accelerating utilization.
- The health care sector added 31,600 new jobs in February 2020. Year over year (February 2020 compared to February 2019), health jobs grew by 2.3%, compared to non-health jobs at 1.5%. The health share of total jobs remains at 10.82%, the all-time high.
- Data through February showed a continuation of the solid health care hiring that began at the end of 2018 and continued through 2019. Looking across our health sector indicators, the strong hiring and accelerating health spending of this period look to be driven by a modest upturn in both utilization and prices.
- Jobs were added in both hospitals and ambulatory care settings at about the pace of the past 12 months, with hospitals adding about 8,000 jobs and ambulatory settings adding about 24,000. Growth has been particularly strong in home health care, which added nearly 10,000 jobs in February, and has been growing at about 5% year over year for the past six months.
- February already seems like a very long time ago amidst a public health and economic outlook that seems to change from hour to hour. We will continue to report on what these measures tell us about the status of our health care sector even as our health and health care become the story of the coming months.
Prices: Health care price growth steady at 2%; is it the calm before the storm? Upward price trend continues but what does the COVID-19 storm have in store for health care prices and utilization?
- Health care prices in February 2020 rose 2.0% from February 2019, down a tenth from the January annual rate of 2.1%.
- Year-over-year hospital price growth fell to 2.3% from a high 2.7% rate in January. Annual physician price growth was 0.8%, and annual drug price growth was 2.4% in February, the fifth straight positive reading after negative growth in 2019.
- The MCPI showed 4.6% annual growth in February, equal to the December 2019 rate, which was the highest since September 2016. This includes 20.7% annual growth in health insurance, a function of an indirect estimator used by the Bureau of Labor Statistics that appears to be emphasizing the Health Insurance Fee that, while eliminated in 2021, was brought back to life for 2020. Insurer profits may also be playing a role.
- For COVID-19, it seems clear that there will be pressure on retail health care prices, but otherwise there are large countervailing forces. Providers will likely see surges from COVID-19 patients, but experts are also predicting (guessing) that significant discretionary care will be delayed. Emergency public policies may serve to lower costs of care by limiting out of pocket burdens, and even, perhaps, make insurers and hospitals whole.
- Since mid-2019, we have highlighted this longest economic expansion in U.S. history. Will March 2020 go down as the month it ended?