Health Spending Up 5.5% in August

ANN ARBOR — The nation’s spending on health care was up 5.5 percent from August 2015 to August 2016, a $3.4 trillion annual rate, according to the monthly Health Sector Economic Indicators, released by the Center for Sustainable Health Spending at the Ann Arbor-based healthcare consultant Altarum Institute.

The consulting firm said the survey showed unexpectedly high growth in spending on health care services in the second quarter. Spending on prescription drugs grew by only 4.3 percent in August, despite higher growth in prescription drug prices.

Altarum officials said that in August 2016, health care prices were 1.9 percent higher than in August 2015. While only a 0.2 increase from July, prices are at their highest rate since October 2012. After hitting the December 2015 all-time low of 0.9 percent, price growth has roughly doubled, and is on the cusp of rising to a more typical 2 percent rate. Yet, the two principal price components, hospitals and physicians, are growing remarkably slowly — 0.9 percent for hospitals and 0.1 percent for physician services. At 6.3 percent growth, prescription drug prices are at their highest level since December 2014.

Health care added 32,700 jobs in September, less than the 12-month average of 37,000 jobs, but up from last month’s low August reading of 22,000. Hospital hiring grew by 7,000 jobs compared to its 12-month average of 13,000. Health jobs grew 2.9 percent year over year while non-health jobs grew 1.6 percent, causing the health share of total employment to reach a new all-time high of 10.8 percent.

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“We have expected health spending growth to slow in 2016 in response to the slowdown in expanded coverage,” said Charles Roehrig, founding director of the Center. “However, the September QSS suggests that spending on health care services in the first half of 2016 has been growing at about the same rate as in 2015. It took a while for expanded coverage to push spending up, so perhaps we must wait a while longer for the slowdown in expanded coverage to be reflected in slower spending growth. We await QSS data for the third quarter which will be released on December 8th.”

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