Category: Health Care Costs

GDP: Tame Health Spending Confirmed In Strong Report

BEAFor those (like me) concerned about how much health spending continues to increase after Obamacare, the second report of third quarter Gross Domestic Product confirmed good news. Although GDP growth was revised up $10 billion, only a scratch was due to health spending. It is good to have a breather from the second quarter, which was dominated by growth in health services spending.

Overall, real GPD increased 3.1 percent on the quarter, while health services spending increased only 2.3 percent, and contributed only 9 percent of real GDP growth. Growth in health services spending was also in line with other services spending and personal consumption expenditures (PCE). However, the annualized change in the health services price index increased by 1.7 percent, lower than the price increase of 1.3 percent in non-health GDP but less than the 2.8 percent price increase for non-health services.

(See Table I below the fold.)

CPI: Flat Medical Prices Lower Than Inflation

blsThe Consumer Price Index rose 0.4 percent in October. Remarkably, medical prices were flat overall. This is the second month in a row we have enjoyed medical price relief. Even prescription drugs rose by only 0.2 percent, half the rate of headline CPI, while prices of non-prescription drugs dropped significantly. Even the price of health insurance dropped a smidgeon!

Prices for inpatient hospital services rose the most, by 0.6 percent. As noted in my discussion of the Producer Price Index, this bears closer watching as President-elect Trump promises more spending on infrastructure, including hospitals.

Over the last 12 months, however, medical prices have increased three times faster than non-medical prices: 1.4 percent versus 4.3 percent. Price changes for medical care contributed 22 percent of the overall increase in CPI.

Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is has been low until recently, even relatively moderate nominal price hikes for medical care are actually substantial real price hikes. More than six years after the Affordable Care Act was passed, consumers have not seen relief from high medical prices, which have increased over twice as much as the CPI less medical care since March 2010, the month President Obama signed the law.

(See Figure I and Table I below the fold.)

PPI: Health Prices Tame, Inflation Flat

BLSOctober’s Producer Price Index was flat. However, prices for most health goods and services grew slowly, if at all. Seven of the 15 price indices for health goods and services declined. The major exception was prices for dental care, which increased 1.5 percent. Dental care is dominated neither by government nor private insurance, so dental price increases are not explained by NCPA’s usual theory of health inflation. I addressed dental price increases in a previous article.

Prices of pharmaceutical preparations for final demand increased 0.4 percent, but that was in line with all goods for final demand. Prices for construction of both health facilities and other buildings increased 0.7 percent. This bears closer watching as President-elect Trump promises more spending on infrastructure, including hospitals.

Prices of health goods for intermediate demand, especially medicinal and botanical chemicals, and biological products, actually dropped. Perhaps this will flow through to prices of pharmaceutical products but that has not previously been the case.

Over the last twelve months, prices of health goods and services have increased faster than overall PPI, which grew 0.8 percent. The tables are turned: 12 of 15 health categories experienced larger price increases than PPI did. Pharmaceutical preparations continue to stand out dramatically, having grown 8.4 percent.

(See Table I below the fold.)

Health Jobs Grew Twice As Fast As Non-Health Jobs in October

BLSThis morning’s jobs report maintained the trend of high growth in health services, with those jobs growing twice as fast as non-health jobs (0.21 percent versus 0.10 percent). With 31,000 jobs added, health services accounted for almost one fifth of 161,000 new jobs.

The disproportionately high share of job growth in health services is a deliberate outcome of Obamacare. While this trend persists, it will become increasingly hard to carry out reforms that will improve productivity in the delivery of care.

The Big Government Conspiracy to Protect Rich Guys

moneyI am not a proponent of conspiracy theories. That said: some conspiracies are real — and designed to protect the wealthy at everyone else’s expense. I’m referring, of course, to the conspiracy by the medical industrial complex to keep medicine costly. The conspiracy insulates the industry and its practitioners from competition using regulatory barriers and exclusive licensure cartels. At first glance these may all seem reasonable, but they extort one-fifth of our national income.

GDP: Tame Health Spending Growth in Strong Third Quarter

BEAFor those (like me) concerned about how much health spending continues to increase after Obamacare, today’s flash report of third quarter Gross Domestic Product brings good news. Of course, the flash GDP report is subject to significant revision. Nevertheless, it is good to have a breather from the second quarter, which was dominated by growth in health services spending.

Overall, real GPD increased 2.9 percent on the quarter, while health services spending increased only 2.3 percent, and contributed only 9 percent of real GDP growth. Growth in health services spending was also in line with other services spending and personal consumption expenditures (PCE). Also, the annualized change in the health services price index increased by 1.6 percent, very close to overall GDP.

(See Table I below the fold.)

CPI: Medical Care Prices Rose Less Than Non-Medical Prices in September

BLSThe Consumer Price Index rose 0.3 percent in September. Remarkably, medical prices rose a smidgen less, at 0.2 percent. This is a big breather from August, when increases in medical prices were dramatic. Nevertheless, both prescription and non-prescription drugs increased prices by 0.8 percent. Prices for medical equipment and supplies dropped by almost as much, shrinking 0.7 percent.

Over the last 12 months, however, medical prices have increased four times faster than non-medical prices: 1.2 percent versus 4.9 percent. Price changes for medical care comprise 27 percent of the overall increase in CPI.

Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is flat, even relatively moderate nominal price hikes for medical care are actually substantial real price hikes. More than six years after the Affordable Care Act was passed, consumers are seeing no relief from high medical prices, which have increased over twice as much as the CPI less medical care since March 2010, the month President Obama signed the law.

(See Figure I and Table I below the fold.)

PPI: Health Prices (Except Pharmaceuticals) Stay Tame As Other Prices Rise

BLSSeptember’s Producer Price Index rose 0.3 percent, a significant pick up. However, prices for most health goods and services grew slowly, if at all. Eleven of the 15 prices for health goods and services reported grew slower than the headline PPI. The major exception was prices for pharmaceutical preparations, which increased 1.2 percent, resuming a trend which I had hoped was breaking down. Further, prices of medicinal and botanical chemicals dropped 0.7 percent. So, price increases for pharmaceutical preparations are not coming from the ingredients.

However, over the last twelve months, prices of health goods and services have increased faster than overall PPI, which grew 0.7 percent. The tables are turned: 11 of 15 health categories experienced larger price increases than PPI did. Pharmaceutical preparations continue to stand out dramatically, having grown 8.1 percent. Nursing homes, for which prices rose 2.4 percent, might replace drug makers as the whipping boy for high health prices, but they have a long way to go.

(See Table I below the fold.)

EpiPen Maker Lobbied U.S. Preventive Services Task Force

According to a report in the Washington Examiner, drug maker Mylan lobbied the U.S. Preventive Services Task Force to require insurers to pay the full price of EpiPens by deeming the drug delivery device a preventative measure. Under the Affordable Care Act, health plans must cover preventive services 100% without cost-sharing regardless of whether deductibles have been met. EpiPens are used by people with severe allergies who go into anaphylactic shock.  They are not used to prevent anaphylaxis, they treat the symptoms once it occurs. For example, under ACA regulations, a flu shot is a preventive medicine. Once you have the flu, seeing your doctor for Tamiflu would be a treatment, not a prevention.

Government And The Cost Of Dental Care

UntitledIn July 2015, former Enron board member, New York Times columnist, and champion of ever more government control of health care, Professor Paul Krugman, wrote a disturbing blog entry:

Wonkblog has a post inspired by the dentist who paid a lot of money to shoot Cecil the lion, asking why he — and dentists in general — make so much money. Interesting stuff; I’ve never really thought about the economics of dental care.

But once you do focus on that issue, it turns out to have an important implication — namely, that the ruling theory behind conservative notions of health reform is completely wrong.

For many years conservatives have insisted that the problem with health costs is that we don’t treat health care like an ordinary consumer good; people have insurance, which means that they don’t have “skin in the game” that gives them an incentive to watch costs. So what we need is “consumer-driven” health care, in which insurers no longer pay for routine expenses like visits to the doctor’s office, and in which everyone shops around for the best deals.

Krugman goes on to insist dentistry is a consumer-driven market: Insurance is far less prevalent in dentistry than in medicine, and most dental care is routine and preventive. Yet, he points out, costs of dental care have risen at the same rate as those of other health care, not at the rate of other consumer goods and services.