March 2021 Health Sector Economic Indicators Briefs

Altarum's monthly Health Sector Economic Indicators (HSEI) briefs analyze the most recent data available on health sector spending, prices, employment, and utilization—helping to fill gaps in the official government data. Below are highlights from the March 2021 briefs:

National health spending continues to lag pre-pandemic levels

• National health spending in January 2021 was 0.2% lower than in January 2020 but has been growing in recent months at rates similar to those observed before the pandemic began.
• Spending in January 2021, year over year, declined in all major categories except home health care, which grew by 6.4%. The greatest decline was in dental services, at -17.1%.
• In January, the recent recovery in health spending reversed in some categories, with spending on nursing homes, dental care, and prescription drugs declining from December levels. The latter drop resulted in the first year-over-year decline in prescription drug spending in more than four years.

Health services prices continue to rise as the recovery in utilization stalls

• Overall health care price growth remained high in February at 2.6%, matching the year over year rate observed in January. February now marks the eighth time in the last twelve months where health care price growth has exceeded 2.5%.
• Price growth for health care services continue to be the major contributor to overall growth with many of the major categories remaining near record levels: February hospital prices rose 4.6% year over year, physician prices rose 2.7%, and nursing home care prices increased 3.1%.
• Conversely, price growth for prescription drugs was negative and fell further in February to -2.7%, falling from the prior month’s rate of -2.4%.
• Our implied measure of health care utilization (spending growth net of price growth), remained negative in the most recent month’s data (January) at -3.8% and has now declined faster for two straight months. Given declining COVID-19 case rates in January, this may indicate longer-term changes to utilization patterns.

One year after pre-pandemic peak, the health workforce is 3.5% smaller

• In February 2021, health care added a modest 19,900 jobs, but these gains were offset by revisions which took away more than 50,000 jobs from January health care employment estimates.
• We now have a full year of data since health care employment peaked in February 2020 at 16.49 million jobs. As of February 2021, the health care workforce is smaller by 3.5%, at 15.92 million jobs.
• Hospital employment was essentially steady in February (-2,000 jobs). Ambulatory care settings added 28,900 jobs, with gains seen in all ambulatory sub-settings, including physician offices, outpatient care centers, home health, dental offices, and labs.
• Nursing and residential care employment fell by 6,800 jobs in February, driven by a drop of 11,600 jobs in nursing homes, which was partially offset by a gain of 4,800 jobs in other nursing and residential care settings. Overall, employment in nursing and residential care has fallen by 9.2%, or 310,000 jobs, since February 2020.
• The economy overall added a strong 379,000 jobs in February, but total employment remains 6.2%, or about 9.5 million jobs below February 2020 peak employment. The unemployment rate dropped slightly to 6.2%.