Health Care Inflation Modest, But Spending Jumps On More Insured

ANN ARBOR — More insurance coverage equals more health care spending and more health care hiring, according to the monthly Health Sector Economic Indicators released Thursday by the Ann Arbor-based Altarum Institute.

Health care inflation, however, remains modest — near record lows since Altarum began collecting data.

Health care prices in May were 1.1 percent higher than in May 2014, only a tenth pf a percentage point higher than the decade-plus low of 1.0 percent last seen in August 2013.

Among components of prices, hospital prices rose by a low 0.7 percent, physician and clinical services prices actually fell 1.1 percent. Prescription drug prices were up 5.3 percent, moderating from the decades-high rate of 6.4 percent reached in December 2014.

Because of more health coverage, national health spending in May 2015 was 5.9 percent higher than in May 2014, moderating from a more-than-8-year peak growth rate of 6.8 percent in March 2015. Prescription drug spending growth continued a 5-month decline from a high of 13.1 percent in December 2014 to 9.3 percent in May, the first time that drug spending growth has been below 10 percent since February 2014.

Paul Hughes-Cromwick, a senior health economist at Altarum, said the Affordable Care Act “is a major factor but not the only factor” in more people having health insurance, driving up health spending despite modest healthcare inflation.

“In the past year approximately 3 million jobs have been created nationally, many with good health insurance,” he said. “Lots of other people who have had insurance coverage … not because of ACA, have most likely felt more comfortable accessing care with their improved financial situation. One of the things we have learned, and we see directly with the Medicare population, is that many people decreased their health care utilization during and immediately after the Great Recession even when they had good insurance coverage. It is reasonable now, fully six years after the recession ended, that this reluctance to access care would subside.”

Altarum also reported that the health sector continued its strong job growth in June with the addition of 40,100 new jobs. Health job growth doubled between 2013 and 2014 (13,000 vs. 26,000 jobs per month) and is nearly three times as high in the first half of 2015 (38,000 per month) than it was in 2013.

Much of the acceleration stems from hospitals, which have added nearly 12,000 jobs per month in the first half of 2015, compared to 3,500 per month in 2014. Health job growth in June at 2.9 percent year over year has pulled ahead of the rate for the rest of the economy, 2.0 percent.

More about the figures from Altarum’s Center for Sustainable Health Spending at www.altarum.org/HealthIndicators.

“The rapid rise in health sector employment accords with the health care spending growth we estimate in this month’s spending brief and in our June Trend Report,” said Charles Roehrig, director of the center. “However, we expect continued moderation in health spending growth during the second half of 2015 as we move past a period of increased insurance coverage and high drug spending, especially as price growth remains near historic lows.”

Altarum offers research and consulting to the health care industry. It employs almost 400 people. Besides its Ann Arbor headquarters, it has branch offices in the Washington, D.C., area; Portland, Maine; and San Antonio, Texas.

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