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October 09, 2015 12:00 AM

Drugs, insurance costs drive healthcare spending higher

Merrill Goozner
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    The latest report from private forecasters at the Altarum Institute shows healthcare spending surged to 18.2% of the gross domestic product in July, the second time it's reached that high watermark this year.

    Out-of-control spending on prescriptions drugs and the soaring cost of health insurance administration continue to be the two major drivers behind rising healthcare costs. Though small as a share of overall spending, fast-rising drug prices and higher insurance overhead have set the stage for healthcare to increase its share of the overall economy at the fastest clip since the onset of the Great Recession.

    The 18.2% of GDP registered in July compared to 17.7% a year ago, according to the Altarum report and analysts at the CMS. That's up slightly from 17.4% in each of the previous five years.

    Healthcare spending grew to $3.3 trillion in August, up 5.7% from a year ago. Prescription drug spending however, leaped ahead at a 9.2% pace. The higher prices drug makers are demanding for specialty drugs and some generics sent the sector's share of overall personal healthcare spending to 12.3%, or $339.1 billion in August, up from 11.9% of overall personal healthcare spending a year ago.

    Administration and net costs of health insurance (after paying medical bills) hit $267.9 billion in August, an increase of 9.4% from a year ago.

    By contrast, hospital spending rose 6.1% from a year ago to $1.046 trillion; physician and outpatient clinical expenditures rose 5.0% to $650.1 billion; and investment in structures and equipment rose just 1.7% to $121.2 billion—the smallest increase in the sector.

    But Altarum analysts said the rapid upward march of healthcare spending that started earlier this year is showing signs of slowing.

    “Much of the higher growth through the second quarter might be attributable to upward pressure from temporary factors such as expanded insurance coverage and the introduction of new drugs,” a note accompanying the report said. “The increases in drug and insurance spending are beginning to moderate.”

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        • Midwest
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        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - AI and Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
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      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Sponsored Video Series - One on One
      • Sponsored Video Series - Checking In with Dan Peres
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