Healthcare spending picks up again

The Great Recession--and to a lesser extent some of the reforms in the Affordable Care Act--have slowed healthcare spending. But is it on the uptick again?

That's a question the Michigan-based Altarum Institute's Center for Sustainable Health Spending asks every month. And for the month of November 2014, while healthcare inflation appeared level, spending was not.

Healthcare prices barely budged year-over-year, rising a total of 1.6 percent between November 2013 and 2014, according to Altarum data. Hospital prices grew even more slowly, at a 1.1 percent annual rate between the two Novembers.

However, healthcare spending was another matter. It grew at a 5.1 percent annual clip between November 2013 and November 2014, Altarum reported. And spending for the third quarter of 2014 rose 5.5 percent compared to the year-ago quarter, which Altarum observed in a statement was "the highest growth rate since the first quarter of 2008, when it was 5.8 percent. Spending in November, year over year, increased in all major categories."

Since the start of the Great Recession in late 2007, healthcare spending has increased at a 2.6 percent annual rate, according to Altarum. For the first 11 months of 2014, spending grew at a 5 percent rate. For all of 2013, the growth rate was only 3.6 percent.

The pharmaceutical sector is perhaps the biggest driver of the current uptick in spending. It grew by 10.9 percent between November 2013 and 2014. But hospital spending also grew by 5.9 percent. By contrast, physician and clinical services grew by only 2.3 percent during that same time period.

Altarum officials believe that the ushering in of major components of the Affordable Care Act accounted for much of the spending growth, as providers began caring for millions more insured patients. And they cautioned that this may be the beginning of a new trend, with the data "suggesting that the long-expected acceleration in health spending may have begun." But hospitals and other healthcare providers have also been fattening up their payrolls in recent months.

However, Altarum also concluded that "low economy-wide inflation continues to exert downward pressure on healthcare prices," suggesting that it may counterbalance the uptick in spending and keep healthcare inflation in check--for now. And other experts believe that slow healthcare inflation is here to stay.

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

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