Slowdown in Health Spending Continues into 2016; Prices Inch Up

ANN ARBOR — National health spending in January 2016 was 4.9 percent higher than health spending in January 2015, according to the latest monthly Health Sector Economic Indicators released by the Ann Arbor health care consulting firm Altarum Institute.

That growth rate was slightly higher than the figure of 4.8 percent growth tallied in December 2015 over December 2014. But it was well below the peak growth rate of 6.8 percent, hit in February 2015 over February 2014.

Altarum’s Center for Sustainable Health Spending, which compiles the indicators, estimated that full year 2015 health spending growth will come in at 5.9 percent. The health spending share of GDP was 18.1 percent in December.

Altarum said health care inflation remains tame, with prices 1.6 percent higher than in January 2015. However, that is up from 1.3 percent price growth year over year in December, and it’s the highest rate of health care inflation since December 2014. Year-over-year hospital price growth fell to 1.2 percent from 1.5 percent in December, but physician and clinical services prices rose 1.3 percent, a sharp break from actual price declines seen throughout 2015. Drug price growth rose to 3 percent from 2.4 percent in December, breaking a four-month string of lower readings.

The health sector added 38,100 new jobs in February, the sixth straight month of annual growth above 3 percent. Hospitals added 10,600 jobs, comparable to the 24-month average. Consistent with recent patterns, health jobs grew 3.2 percent year over year, while non-health jobs grew 1.7 percent, putting the health share of total employment at a new all-time high of 10.71 percent.

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“Health spending growth in 2015 was considerably higher than the previous six years, yet it decelerated throughout the year, indicating that the 2015 surge was temporary,” said Charles Roehrig, founding director of the center. “Quarterly Services Survey data released yesterday confirms this story for the final quarter of 2015. While the return to slower growth is comforting, we remain concerned about what rate of growth will be slow enough to be sustainable long term.”

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

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