October Health Spending Up 5.5%

ANN ARBOR — National health spending in October 2016 grew at an annual rate of 5.5 percent, driven up by the hospital component, which grew 6.6 percent, according to the monthly Health Sector Economic Indicators, published by the Ann Arbor-based Altarum Institute.

Unlike the past few years, the increase in prescription drug spending, only 3.5 percent growth, actually dampened the overall rate, despite a huge increase in prescription drug prices.

The numbers put 2016 on pace for 5.6 percent health spending growth, slightly below the official 5.8 percent rate just released for calendar year 2015. At $3.43 trillion, the health spending share of gross domestic product was 18.2 percent in September, falling just below the all-time high of 18.3 percent seen in each month from May to August 2016.

Health care prices in October 2016 grew 2.2 percent above the October 2015 level, with prescription drug prices leading the way at 7 percent, the highest in more than 24 years. Prices for physician services showed almost no growth while hospital prices rose 1.5 percent. Health care prices have now grown faster than economy-wide prices for 9 consecutive months.

Health care added 28,400 jobs in November, less than the 12-month average of 34,000 jobs, and continuing a slow deceleration from the more than 40,000 new jobs per month added in mid-2015. Health jobs grew 2.7 percent year over year, down from rates above 3 percent seen in mid-2015 through mid-2016, but higher than non-health jobs at 1.4 percetn. This put the health share of total employment at an all-time high of 10.8 percent.

For the full report, visit www.altarum.org/healthindicators.

“Our current estimate of 5.6 percent growth in health spending for the first ten months of 2016 is likely to be revised slightly downward once findings from the December Quarterly Services Survey are incorporated,” said Charles Roehrig, founding director of Altarum’s Center for Sustainable Health Spending. “Thus, 2016 will show a slowing in spending growth relative to the 5.8 percent growth in 2015 shown in the new national health expenditure account data. We remain puzzled by slow growth in prescription drug spending despite high price growth, and high growth in hospital spending despite low price growth.”

Altarum provides consulting and research to the health care industry. It employs more than 450 people at its Ann Arbor headquarters and offices in Washington, D.C., Silver Spring, Md., Rockville, Md. and Portland, Maine.

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