Category: Health Care Costs

Significant Job Losses in Nursing Homes A Drag On Health Job Growth

BLSThis morning’s jobs report was somewhat weaker than expected, adding 151,000 jobs versus 180,000 expected. For the first time in many months, job growth in health services slightly lagged growth in non-health jobs (0.09 percent versus 0.11 percent).

However, there was a significant divergence within health services: Jobs in ambulatory care and hospitals jumped 0.16 percent and 0.21 percent, while nursing homes shed 7,000. That imposed a massive drag on health services overall, limiting growth to 14,000 jobs (Table I).

GDP: Health Services Grow Over Five Times Faster Than “Sluggish” Non-Health GDP

BEAToday’s second estimate of second quarter Gross Domestic Product confirms spending on health services is dramatically outpacing other “sluggish” GDP growth. Fixed investment, durable goods, and inventories continued to collapse, while imports increased. Therefore, growth in services spending grew much faster than GDP. In real (inflation-adjusted) dollars, services grew 4.3 percent (annualized, seasonally adjusted). As a large component of services, health services grew 3.8 percent.  While real GDP growth was 1.1 percent, once health services is stripped out, non-health GDP grew just 0.7 percent (Table I).

(See Table I below the fold.)

The “Right to Shop” For Health Care

credit-card-2Anyone who has undergone a medical procedure knows it is very difficult to figure out how much an insured patient will pay out-of-pocket. It is often not clarified for months after the procedure, after a flurry of incomprehensible paperwork from insurers, doctors, labs, et cetera, has landed in the patient’s mailbox.

(Personal aside: A couple of years ago, my health insurer encouraged me to go paperless, and I signed up for electronic messages about claims. It was so confusing, I went back to paper after a few months. At least you can scrunch up a letter and throw it across the room with an anguished scream, which you don’t want to do with your computer.)

This problem has led to a bunch of state laws attempting to impose “price transparency” on medical providers. As discussed previously, they do not work, because relationships between insurers and providers inhibit transparency. Medical providers “customers” are insurers, which pay most of their claims, not patients. Further, the real problem with medical prices is not that they are opaque, but that they are not formed in a normal market process. Instead, they are negotiated by third-party bureaucracies.

CPI: Medical Prices Continue Upward March

BLSThe Consumer Price Index for July was flat. Medical prices, however, continued their upward march, increasing by one half of one percentage point. If prices for medical care had been flat, the CPI would have declined by 0.1 percent. Prescription drugs, physicians’ and other medical professionals’ services, and health insurance stand out even within medical care.

Over the last twelve months, prices for medical care have increased almost seven times faster than prices for non-medical items in the CPI. Price increases for medical care have contributed 40 percent of the overall CPI increase.

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. Consumers are seeing no relief from high medical prices.

PPI: Health Price Inflation Low, But Not Low Enough

BLSThis morning’s Producer Price Index came in unexpectedly low, decreasing 0.4 percent versus an expected slight increase of 0.1 percent. Except for nursing home care, which increased 0.9 percent, producer prices for medical goods and services decreased or increased very modestly. Of 15 medical goods and services measured in the PPI, four actually experienced price decreases over the month. This number includes pharmaceutical preparations. However, because overall PPI actually deflated significantly, all medical prices increased at a faster rate than the overall PPI.

Over the last twelve months, prices for all but one medical category (medical lab and diagnostic imaging services) have increased faster than overall PPI. At 6.3 percent (versus just 0.3 percent for final demand), producer prices for pharmaceutical preparations stand out. However, the monthly PPI suggests this trend might be breaking down. Nursing homes, for which producer prices increased 2.5 percent might replace drug makers as a target of politicians’ campaigns against health costs, but they have a long way to go.

(See Table I below the fold.)

Health Services Jobs Grew 75 Percent Faster Than Non-Health Jobs

BLSThis morning’s jobs report was the second month in a row of good news on the employment front. However, like last month’s report, jobs in health services grew much faster than non-health jobs. Health services added 43,000 jobs in July comprising 17 percent of the 255,000 civilian non-health, non-farm jobs added (Table I). The monthly rate of growth in health services jobs was 75 percent more than for other jobs. The shifting of jobs towards the government-controlled health sector continues.


GDP: Health Services Spending Dominates “Close To Zero” Economic Growth

BEAAs the U.S. economy continues to flirt with recession, this morning’s “flash” Dross Domestic Product release for the second quarter indicates “close to zero” growth. Business investment has collapsed, leaving personal consumption expenditures to drive what little growth there is.

As a large component of personal consumption expenditures, spending on health services continues to outpace GDP growth. Growth in health services spending of $28.4 billion (annualized) comprised 18 percent of GDP growth. However, personal expenditures on services grew much more than GDP overall. Growth in spending on health services amounted to 15 percent of growth in personal consumption expenditures and 25 percent of spending on services. Spending on health services grew by 5.3 percent, versus only 3.2 percent growth in non-health services GDP (Table I).

Brookings: The Unaffordable Care Act Lowered Individual Premiums

Significant premium hikes in the Obamacare exchanges have been in the news lately. A Dallas Morning News article recently proclaimed, ‘When your health insurance is bigger than the mortgage, something’s wrong’. Indeed, insurers are charging premiums that about the size of a car payment on a late model used car. For a family the premiums are sometimes as high as a mortgage payment. Yet, insurers are hemorrhaging money – suffering losses to the tune of billions since Obamacare went into effect.

But apparently my perception is dead wrong. A pair of Brookings scholars argue individual premiums are actually lower than they would have been absent the Affordable Care Act. What???

Obamacare’s Perverse Job Creation Program

doctor-with-familyThe latest jobs report gave the stock market a boost and injected some optimism into public sentiment about our economic prospects. Unfortunately there’s a problem with the current employment situation that few understand: Obamacare has likely led to too many jobs in health care, drawing labor from more productive functions.

Dan Diamond of Politico reports jobs in health care have grown 23 percent since 2005, while jobs overall have grown only 6 percent. Much of this was driven by the collapse of non-health jobs in 2008-2010, while health jobs remained undisturbed. As the economy recovered, Obamacare kept layering jobs onto health care that did not actually improve health care:

Ambulatory Surgery Centers Saved $38 Billion in Private Health Spending

Doctors Moving a PatientNew research from the Healthcare Bluebook (sponsored by the Ambulatory Surgery Center Association) indicates the privately insured population saved $38 billion by using Ambulatory Surgery Centers (ASCs) instead of hospital outpatient departments for day surgeries. That figure includes $5 billion of lower out-of-pocket costs paid by patients directly.

What is remarkable is that only 48 percent of procedures (such as joint replacement) that can currently be done in either setting are actually done in ASCs. Assuming it would not be appropriate for three percent of surgeries to be done at ASCs (due to complexity), the study estimates shifting the balance of procedures to ASCs would save yet another $38 billion. Plus, shifting other procedures, not currently done at ASCs, would save another $56 billion.