Healthcare spending is unusually slow

Despite fears that healthcare inflation may be on the rise, new economic data suggests just the opposite.

The White House Council of Economic Advisers, citing data from the Bureau of Economic Analysis (BEA), concluded that the drop in gross domestic product (GDP) during the first quarter of this year was linked in part to a drop in healthcare spending. Overall, the BEA concluded that a decline in healthcare spending contributed to a 0.2 percent drop in the overall GDP. During the first quarter, economic growth declined by 2.9 percent.

Overall, the BEA estimated that healthcare prices increased at just a 0.5 percent annual rate during the quarter, while healthcare spending dropped at a 1.4 percent rate on an annual basis.

Although the report noted that the sector can be volatile, it concluded that on a year-over-year basis, healthcare prices are up just 0.9 percent, while utilization is up 2.6 percent.

"Today's data, as well as a variety of other recent data, show that healthcare prices and per-enrollee spending (the key driver of premiums) are continuing to grow at unusually slow rates," the report said. It added that it was helping with the overall economic picture.

Various reports indicate that healthcare spending in the U.S. has been unusually slow in recent years, blamed in part by the Great Recession. The Altarum Institute Center for Sustainable Health Spending concluded that prices rose 1.6 percent in April, with hospital price growth only moderately higher.

However, the White House Council did suggest that spending may be on the rise in the near-term--with some qualifications.

"It is likely that the coming quarters will see faster growth in total healthcare spending as the millions of people who gained health insurance coverage during the Affordable Care Act's first open enrollment period begin to use their new coverage," the report states. "Importantly, this type of uptick in total spending would not mean that people who had coverage before the Affordable Care Act are facing higher costs."

To learn more:
- read the report