Healthcare Price Growth at Lowest Pace in 2 Years

Health spending growth in August was only 4.3% higher than one year earlier, and observers say the relatively slow pace is in response to a leveling-off in insurance coverage.

Fueled by the fight over the Affordable Care Act and structural health sector changes, healthcare price growth in August rose by only 1.2% compared to a year earlier, according to Altarum’s Health Sector Economic Indicators Briefs.

• This is the lowest health price growth rate recorded in almost two years, and just slightly above the all-time low. Contributing to overall slow price growth is a historically low Medical Consumer Price Index growth rate, a possible signal of relief for healthcare consumers with substantial out-of-pocket expenditures.
   
• The 12-month moving average of the Health Care Price Index fell to 1.8% growth after being at 1.9% for six months, dousing any expectations of a return to a 2% growth rate range in the near term. Year-over-year hospital price growth fell to from 1.5% to 1.3%, and physician and clinical services price growth fell one-tenth to .5%. Annual drug price growth fell to a 2.7% rate, its lowest reading since growing by 2.4% in December 2015.  
   
• Despite an upward revision to recent estimates, health spending growth in August 2017 was 4.3% higher than a year earlier. The moderation in spending growth is in response to a leveling-off in insurance coverage.
   
• Healthcare job growth also remained modest, with 22,500 new jobs added in September 2017, slightly less than the 2017 average of 25,000. Slow hospital job growth in 2017 is a primary force behind the health sector growing at about three-quarters the pace of 2015 and 2016.
   
• In August, the health share of gross domestic project fell to 18%, exceeding $3.5 trillion. Spending growth in August increased in all major categories, led by home healthcare at 6.5%. Hospital spending continues to grow slowly, at a 2.3% rate.