September 2019 Health Sector Economic Indicators Briefs

Economic Indicators | September 20, 2019

These monthly briefs analyze the most recent data available on health sector employment, spending, prices, and utilization—helping to fill gaps in the official government data.

Below are highlights from this month's reports: 

Spending: Led by hospitals, health spending growth continues its recent decline

  • At $3.85 trillion (seasonally adjusted annual rate), national health spending in July 2019 was 4.3% higher than it was in July 2018. The July 2019 nominal gross domestic product (GDP) growth over a 12-month period was 4.2%, and the resulting health spending share of GDP was 17.9% and 18.1% of PGDP. (Note that while laypersons often say that U.S. health care spending is 3 trillion dollars, it is now much closer to 4 than 3!)
  • Spending in July 2019, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 7.5%. Growth in spending on dental services was the slowest, at 0.9%.
  • With recent US Bureau of Economic Analysis (BEA) revisions and this month’s new data, the 2019 year-over-year growth rate in national health spending through July of 4.9% puts 2019 spending growth on track to be close to CMS’ forecasted growth rate of 4.8% for the entire year, and may end up slightly below the CMS forecast, if the current downward trend in spending growth continues.
  • The lower growth rates are driven primarily by changes to the growth in hospital spending, which accounts for 33% of national health spending.

Labor: Health sector continues steady job growth after peaking in Q4 2018 and Q1 2019

  • Health care added 23,900 new jobs in August, below the 12-month average of 32,700.
  • Hospitals added 8,800 jobs in July, around the 12-month average of 8,100, while ambulatory care settings added only 12,100 jobs compared to an average of 21,400.
  • Year over year (August 2019 compared to August 2018), health jobs grew by 2.4% while non-health jobs grew by 1.3%. The health share of total jobs is at a new all-time high of 10.85%.

Prices: Health care price growth ticks up to still low 1.5%; drug prices still falling

  • In August 2019, annual growth in the Health Care Price Index (HCPI) was 1.5%, up one-tenth from the July rate. Mostly modest component growth changes led to an uptick in the HCPI, though physician price growth went from 0.2% in July to 0.5% in August, dental services rose from 2.3% to 3.2% in August, and other non-durable medical products saw price growth rise from 0.5% to 2.6%.
  • The annual price growth for prescription drugs “rose” from -0.8% to -0.7%. We have observed exceptionally slow growth in prescription drug prices since July 2018, and the 12-month moving average now stands at -0.4%—a 47-year low.
  • Overall health care prices (though not capturing “intensity”), continue to grow more slowly than economy-wide prices, bringing this historically long streak to 25 months as of July 2019 (see Exhibit 5). This behavior is stark, and it is still little appreciated that health care price growth no longer drives up economy-wide price growth (the converse is true). And, as we note each month, health care inflation is amazingly low for this stage of the economic recovery. August 2019 was the 122nd month of expansion (the longest in U.S. history) following the Great Recession, yet the HCPI growth is steady near 1.5%.
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