Health Spending Growth Fell to 4.9% in December and Stands at 5.9% for 2015 Overall

February 16, 2016 - Altarum Institute

Preliminary estimates show health spending grew only 4.9% in December 2015 compared to December 2014, continuing a steady decline from a peak of 6.8% in February 2015. Spending on hospitals and prescription drugs, each of which is growing at less than half the rate observed in February, led the decline. For 2015 as a whole, health spending growth averaged 5.9%, the highest rate since 2007, the year preceding the recession.

Health care prices in December 2015 were 1.2% higher than in December 2014, up from 1.1% in November, exhibiting an upward trend from its all-time low rate of 0.9% in September 2015. While still barely negative at -0.1%, price growth for physician and clinical services has bounced back from yearlong readings near ­1.0%. From a multidecade high of 6.4% for prescription drugs in December 2014, we have seen steady moderation to its December 2015 rate of 2.4%.

The health sector added a robust 36,800 new jobs in January, a quarter of all new non-farm jobs. Nearly two-thirds were in hospitals, which added 23,700 jobs, twice as many as the 12,000 jobs added in December. Consistent with the pattern over the past few months, health jobs grew 3.2% year over year, while nonhealth jobs grew 1.7%, putting the health share of total employment at 10.71%, a new all-time high.

These data come from the monthly Health Sector Economic IndicatorsSM briefs released by Altarum Institutefs Center for Sustainable Health Spending (http://www.altarum.org/HealthIndicators).

gThe jump in the health spending growth rate to 5.9% in 2015 appears to be temporary, with growth trending below 5% as we approach 2016,h said Charles Roehrig, founding director of the center. gThis pattern is consistent with the expectation that spending growth would increase with expanded coverage and then drop back as coverage levelled off. The latest spurt in health sector hiring is a bit at odds with the spending slowdown, and it will be interesting to see how this resolves in the coming months.h

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Please see a new Health Affairs Blog post by Charles Roehrig, gAt Last: The Data to Routinely Discuss Health Spending by Medical Condition.h