Ann Arbor Firm Finds Healthcare Inflation Tame, Spending Increase Lower

ANN ARBOR — Health care prices in the United States were just 1.1 percent higher in June than they were a year earlier, according to the latest Health Sector Economic Indicators, released by the Center for Sustainable Health Spending at the Ann Arbor-based healthcare consultant Altarum Institute.

June was the third consecutive month at that rate and only a tenth above the decade-plus low of 1 percent growth registered in August 2013. Price growth for prescription drugs moderated to 4.8 percent, now well below its multi-decade high of 6.4 percent reached in December 2014.

The report found that national health spending was 5.7 percent higher in June than a year earlier, down from the 8-year high growth rate of 6.7 percent in the first quarter of 2015.

The 5.7 percent growth rate is still higher than the new Centers for Medicare & Medicaid Services 2014 estimate of 5.5 percent. The health spending share of gross domestic product was 18.1 percent in June, barely below the all-time high of 18.2 percent first recorded in March 2015.

Altarum says the increase in spending despite low price increases is the product of increased healthcare insurance coverage under both the Affordable Care Act and an improving economy.

The health sector added about 28,000 new jobs in July, a bit off the pace of the previous 3 months but still above the 24-month average of 26,600. In the first 7 months of 2015, the health sector has averaged more than 37,000 new jobs per month.

Health job growth in July reached 3 percent year-over-year for the first time since 2002. The year-over-year growth rate for hospitals was 2.6 percent, the highest rate since May 2008. The health share of total employment increased to 10.65 percent, approaching the high of 10.66 percent last seen in December 2012.

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“June health care prices across all services are down for Medicare and Medicaid but up for private payers,” said center director Charles Roehrig. “This new Bureau of Labor Statistics price index tells us that the already large gap between what private and public insurers pay for the identical service is getting larger. This has obvious potential implications for patients and providers and we plan to track it closely.”

Altarum provides research and consulting to the healthcare industry through 400 employees at offices in Ann Arbor, Washington, D.C., Silver Spring, Md., Rockville, Md., Portland, Maine, and San Antonio, Texas.

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