Vital Signs Blog

Estimate shows more evidence health spending is on the rise

A new estimate shows health spending accelerated during the first three months of the year, though this one says more slowly than the annualized federal estimate of 10% that has been heavily debated since its release last week.

Health spending first-quarter growth increased at an annualized rate of 8.9%, according to the Altarum Institute Center for Sustainable Health Spending, which released the estimate with its snapshot of March health spending. The center's lower projection is notable because it captures the nation's total health spending instead of the federal estimate's more limited tally of spending for health services, excluding goods such as prescriptions and medical equipment. The figures differ in another way as well: The federal estimate is real per capita spending; the center reported nominal overall spending.

Charles Roehrig, an Altarum vice president and the center's director, rejected the projected 10% growth for the year in a blog post that outlined why the first-quarter is an unlikely predictor for spending throughout the year.

Why? Millions of newly insured individuals under the Patient Protection and Affordable Care Act were included in federal spending estimates, but without data on their spending that will come in June, he said. The law's insurance expansion this year will also slow after March, which was the deadline to buy insurance through private exchanges created by the Affordable Care Act, he said.

“In short, because the surge in numbers of insured individuals will not be repeated in subsequent quarters, the 10% annualized rate of growth in spending is NOT a good indicator of how the full year is likely to play out,” he said.

Half of spending during the first quarter was attributable to the newly insured, he wrote, and minus that spending during the final nine months of the year, health spending growth would be 6.5% for the year.

The center's estimates show that health spending in March increased 7.1% from the same month a year ago. That's the biggest gain in year-over-year monthly growth in roughly nine years.

Prescription spending rapidly accelerated in March compared with the same month a year ago with an increase of 11%. Hospital spending ranked behind drugs as the second-fastest growing sector in March, with an 8.3% hike compared with the prior March. Physician spending ranked third with year-over-year growth in March of 6.6%.

Greater demand for healthcare is behind the faster spending growth as the industry continued to see sluggish price increases. The annualized increase in health spending prices for March was 1.1%, the center said. For drugs, hospitals and physicians, March's increases, in annualized terms, hit 2.1%, 1.3% and 0.2%, respectively.

Follow Melanie Evans on Twitter: @MHmevans


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