August 15, 2017

US health care spending isn’t growing so fast after all, report finds

Daily Briefing

    Health care spending is growing at a slower rate than had been previously projected, according to an Altarum Institute report released Friday.

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    The report is largely based on data from the Bureau of Economic Analysis' (BEA) 2017 National Income and Products Accounts. According to the Altarum Institute report, BEA updates its National Income and Products Accounts annually.

    Spending increases

    The report found that national health spending reached a seasonally adjusted annual rate (SAAR) of $3.51 trillion in June 2017. According to the report, national health spending in June 2017 was 4.8 percent higher than national health spending in June 2016. Health spending in June 2017 accounted for 18.1 percent of the United States' nominal gross domestic product (GDP).

    The report stated that U.S. health spending in June 2017, when viewed year over year, grew in all major categories. According to the report, prescription drug spending rose the most, at a rate of 6.1 percent, while spending on nursing home care increased the least, at a rate of 0.05 percent. Overall, the report stated that, as of June 2017, U.S. spending on:

    • Hospital care reached a SAAR rate of $1.13 trillion, representing 32 percent of total health spending;
    • Physician and clinical services reached a SAAR rate of $708 billion, representing 20 percent of total health spending;
    • Prescription drugs reached a SAAR rate of $359 billion, representing 10 percent of total health spending;
    • Nursing home and home health care reached a SAAR rate of $260 billion, representing 8 percent of total health spending.

    According to the report, spending on personal health care goods and services represented the largest share of total health spending in June 2017 at 85 percent.

    Health spending growth rate lower than previously projected

    The report stated that, based on updated data, health care spending estimates for both 2016 and 2017 now are lower than previous BEA estimates.

    According to the report, national health care spending is now estimated to have grown by 4.6 percent in 2016, down from BEA's previously projected 5.2 percent growth rate. Further, U.S. health care spending for the first five months of 2017 now is estimated to have grown by 4.7 percent, down from BEA's previous projection of a 4.9 percent growth rate. According to the report, national health care spending for the first five months of 2017 now is expected to have averaged 18.1 percent of the country's GDP, down from a previously projected average of 18.3 percent of the GDP.

    The report authors wrote, "These reductions in estimated health spending levels and growth rates reinforce recent evidence of spending moderation."

    Altarum Institute Co-Director Ani Turner said health care providers are increasing their prices at rates more in line with general inflation.

    However, the report authors wrote that they "do not believe that even these relatively moderate values [of spending growth] are sustainable in the long run" (Barkholz, "Vital Signs," Modern Healthcare, 8/11; Demko, "Pulse," Politico, 8/11; Altarum Institute report, 8/11).

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