Healthcare spending growth moderate, prices bump up

Healthcare spending continued to grow at a modest rate this summer, while pricing actually grew by a higher-than-average margin.

Health spending rose at an annualized rate of 4.9 percent in July compared to July 2015, and is on pace to reach $3.36 trillion in 2016, according to data (pdf.) from the Altarum Institute's Center for Sustainable Health Spending. That compares to a 5.6 percent annualized growth rate reported in February 2016.

However, Altarum noted that Census Bureau data concluded that healthcare spending grew 6.9 percent during the second quarter, “suggesting that there will be upward revisions to our services data in next month’s brief.”

That additional data is in line with a report issued by the Office of the Actuary of the Centers for Medicare & Medicaid Services that concluded spending increases would average 5.8 percent annually between 2015 and 2025. The current trend has raised concerns that the U.S. economy could be damaged as a result.

Healthcare spending represented 18.2 percent of the U.S. gross domestic product in June of this year, unchanged from the May rate and continuing to represent an all-time high for the United States.

The Altarum report found: 

  • Hospital spending represented 32 percent of the total, or $1.07 trillion, up 4.6 percent from July 2015.
  • Physician and clinical services represented 20 percent of the total, or $673 billion, and was up 5.2 percent.
  • Prescription drug spending, which has been consistently been among the highest risers in recent years, grew only 3.9 percent in July.
  • Durable medical equipment expenditures led the spending rise, up 7.5 percent.

Prices rose at their highest rate since September 2014, according to Altarum pricing data (.pdf). But they still rose only 1.7 percent in July of this year versus July 2015.

Year-over-year hospital pricing rose only 0.8 percent in July, down from the 1 percent increase reported in June. Other findings:

  • The prices of physician and clinical services saw the lowest increase, inching up only 0.1 percent.
  • Pricing for nondurable medical products actually decreased 1.6 percent.
  • Prescription drug prices grew at the fastest rate, rising 5.2 percent.