Driven by Drug Costs, Health Care Spending Ratchets Up

The price of health care in the United States shot up 2.2 percent in February compared to 1.6 percent overall annual growth in 2016 and 2017, according to statistics gathered and released by health care consultancy Altarum. The lowest annual growth rate — 1.1 percent — came in 2015.

health-care-spending-rises-due-to-drugsAt the same same, hospital prices rose 3.8 percent, leading Altarum to note:

We are puzzling over this significant jump in hospital prices in recent months based upon the hospital producer price indexes from Bureau of Labor Statistics (BLS). Hospital prices averaged 1.6% growth in 2017, increasing to 3.5% during the first 2 months of 2018. Further, growth has accelerated for each of the three main payers: Medicare, Medicaid, and private health plans.

The company said its statistics also “suggest that national health spending grew by 4.6 percent from its 2016 level,” a rate of growth which it said is “not sustainable.”

The primary cause of the pricing increases stems from prescription drugs, whose prices rose just 1.7 percent in 2016 but 5 percent in 2017, according to Altarum.

“This 5.0 growth estimate does not account for possible changes in prescription drug rebates and, based upon 2016, we expect this could lead to a significant downward revision in the growth rate when CMS releases official 2017 estimates this December,” the company said in a statement.

As a percentage of GDP (Gross Domestic Product), health care spending for the past 22 months has fluctuated between 17.9 and 18.1 percent, with the current level standing at 18.0.

The Altarum findings come on the heels of a study in the Journal of the American Medical Association (JAMA), which found that the United States spends nearly twice as much on health care as do “10 top-income countries” despite similar utilization rates.

“Prices of labor and goods, including pharmaceuticals and devices, and administrative costs appeared to be the main drivers of the differences in spending,” the study concluded.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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