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Healthcare spending accelerated during the first quarter, while price growth climbed slightly

With March, the streak of 17 consecutive months in which year-over-year growth in health spending was less than GDP growth has come to an end.

Jeff Lagasse, Associate Editor

National health spending showed signs of acceleration during the first quarter of 2019, according to a new Altarum report.

At $3.76 trillion -- a seasonally adjusted annual rate -- health spending in March was 4.6 percent higher than it was in March 2018. The March 2019 nominal gross domestic product growth over a 12-month period was 4.6 percent, and the resulting health spending share of GDP was 17.9 percent.

IMPACT

Most surprising to the authors was the apparent acceleration in prescription drug spending, whose year-over-year growth was 4.9 percent in December and increased to 8.7 percent in March. Yet the U.S. Bureau of Economic Analysis' preliminary estimate does not account for rebates from drug manufacturers, which are not available to the government until much later.

With March, the streak of 17 consecutive months in which year-over-year growth in health spending was less than GDP growth has come to an end -- both grew at 4.6 percent and GDP growth is anticipated to slow further in coming months.

Spending in March, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 8.7 percent. Growth in spending on dental services was the slowest, at 1.4 percent.

PRICES

In April, annual growth in the Health Care Price Index was 1.5 percent, up from 3 consecutive months at 1.3 percent.

Year-over-year hospital price growth was 2 percent, up from 1.6 percent in March. Physician price growth rose to 0.7 percent in April from 0.5 percent in March. Drug price growth at 0.3 percent was up from -0.4 percent in March and -1.2 percent in February -- the lowest growth since September 1972.

Since July 2018 there has been exceptionally slow growth in prescription drug prices, Altarum found. In fact, for these past 10 months, price growth is rising at an annual rate of 0.2 percent. The closest recent period would be a growth rate of 0.4 percent for 10 months in 2013.

But there's reason to think this situation will reverse in the next few months, beginning in July, likely resulting in higher growth from these lower baseline values from 12 months earlier. There may also be mismeasurement at work given other evidence of more than 500 drugs seeing price increases in the first quarter of 2019.

LABOR

After a very strong fourth quarter in 2018 and first quarter this year, healthcare hiring grew at a more moderate pace in April, adding 27,000 new jobs, less than the 12-month average of 33,600.

Over the last 12 months, total private-sector healthcare employment grew by 403,000 jobs, translating to 2.5 percent. During this period, total non-health payroll employment increased by 2.2 million jobs, or 1.7 percent. The health are share of total employment held at the record high of 10.81 percent.

THE TREND

Significantly higher healthcare spending in the United States will continue a damaging ripple effect across the economy, crunching public sector budgets and those of businesses and households as well, Moody's found last fall.

The U.S. spends almost double what other high-income countries spend as a share of their economies, Moody's said. Households and businesses made up nearly half of the spending.

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com

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