Healthcare price increases slowing as utilization, personal spending continue COVID-19 rebound

A stethescope and money
The slowdown from pandemic-driven healthcare price increases is a stark contrast to the rapid inflation now playing out across the rest of the economy, the Altarum Institute wrote in its latest monthly report. (Valeriya/Getty)

In contrast to mounting healthcare utilization, personal healthcare spending and economywide price trends, the price of healthcare has begun to stabilize after months of rampant pandemic growth.

The Altarum Institute, a nonprofit research group, reported a 2% annual increase in overall healthcare prices for May 2021 and a 1.9% increase for April 2021.

These growth rates had exceeded 2.5% for much of last year and ran as high as 2.7%. After a brief respite in the fall, healthcare price growth again jumped over 2.5% early in 2021, according to the institute's data (PDF).

This “noticeable deceleration and moderation” in price growth from April to May spanned each of the healthcare subcategories monitored by Altarum.

Hospitals and physician services retained the highest year-over-year price growth at 3.6% and 3.1%, respectively. Nursing home care and home health care showed the greatest growth drop off during the pandemic, however, dropping from 4.7% to 2.1% and 3.6% to 1.5% year over year, respectively.

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The normalization of healthcare price growth stands out against other trends both inside healthcare and across the broader economy, Altarum wrote.

For the former, personal healthcare spending increased 40.1% year over year in April while utilization jumped 38.2% year over year for the same month.

Outside of the industry, Altarum highlighted a 5% year-over-year increase in the consumer price index and a 6.6% increase for the producer price index during May (generally attributed to a combination of recovering demand for goods and services, Federal Reserve monetary policy and supply constraints).

The research group floated two potential explanations why healthcare prices have so far bucked the broader economic trends.

RELATED: PwC: Health costs to likely go up 6.5% in 2022 as systems invest in supply chain, digital health

“First, many of the supply constraints for healthcare inputs are likely less significant in 2021 than they were at the start of the pandemic when many critical medical supplies were in severe short supply due to treating COVID patients,” Altarum wrote in the report. “Second, while the demand for healthcare services may be increasing, the price for that care is likely less mutable in the short run as prices are set annually either by governments (Medicare and Medicaid) or in longer-term contracts (private health insurance).

“The extent to which these factors continue to impact prices in 2021 and if healthcare price growth will remain below other sectors remains to be seen,” the group wrote.

Altarum’s analyses are based on monthly data from the U.S. Bureau of Labor Statistics.

This monthly report, published Thursday, came a day after another from the research group predicting the Food and Drug Administration’s controversial approval of Aduhelm for Alzheimer’s disease treatment stands to single-handedly increase national healthcare expenditure by more than 1%.

Meanwhile, a PwC Health Research Institute report released earlier this month suggested healthcare costs are likely to increase by 6.5% next year due to continued COVID-19 impacts on spending.