Healthcare spending increase may be short-lived

Dollars

Healthcare spending, which was mostly in check, hovering close to the general inflation rate in recent years, may be on the rise again--or not.

Healthcare spending and prices may be on an unsustainable rise after years of slow growth during the Great Recession, Forbes suggests. But healthcare spending last March was 7.1 percent higher than in March 2013, according to new data from the Altarum Institute's Center for Sustainable Health Spending. That's 3.6 percent higher than the growth of the gross domestic product (GDP) during the same period, and the highest rate since February 2005, more than two years before the onset of the Great Recession in late 2007. Health spending also comprised 17.9 percent of the total U.S. GDP, an all-time high, and up from 16 percent in December 2007.

"Healthcare spending shows no sign of slowing down," Neil Howe of Forbes wrote in a recent opinion piece. First-quarter GDP growth would have been negative without healthcare expenditures, he suggested.

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But that conclusion may be premature, according to an Altarum official. "Health spending growth rates have increased rapidly in recent months, but the 7.1 percent figure observed for March may well mark the end of this acceleration," Charles Roehrig, director of the Center, said in a statement. "This is because of a leveling off in the numbers of newly insured under the Affordable Care Act. The 10 percent annualized growth rate for the first quarter of 2014 that has received recent media coverage is based upon comparison to the preceding quarter and is not an indicator of annual growth for 2014 as a whole."

Altarum also noted that the growth of healthcare spending as a share of GDP may be due to low overall economic growth.

By contrast, prices for healthcare services were up just 1.1 percent between last March and March 2013 – just one-tenth of one percent higher than the all-time low, which occurred last year. However, Roehrig noted just last month that much of the decrease in the rate of healthcare spending over the past decade has been the result of two recessions, and that continuing to moderate the growth rates will be a challenge.

To learn more:
- read the Altarum Institute spending report (.pdf)
- here's the Altarum Institute price report (.pdf)
- check out the Forbes article

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