Category: Health Care Costs

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.

CPI: Medical Prices Resume Upward March

BLSDue to vacation, I did not discuss June’s release of the Consumer Price Index for May, in which medical care prices were very moderate. This continued that which was observed in May (for the April CPI).

Unfortunately, prices for medical care resumed their upward march in the June CPI, released today. At 0.4 percent, prices for medical care increased twice as fast as the CPI for all items. Price changes for medical care contributed 16 percent of the price change for all items. Prescription drug prices, especially, resumed their increase. Prices for medical care services, on the other hand, were in line with the CPI for all items.

Over the last twelve months, prices for medical care have increased over four times faster than prices for all items other than medical care. Medical care price increases have contributed almost one third (29 percent) to the price increase of one percent for all items. Claims that consumers have experienced relief from medical prices are simply not grounded in data.

(See Table I below the fold.)

PPI: Health Prices Remain Tame

BLSAlthough I did not discuss June’s release of the Producer Price Index (PPI) for May at this blog (due to vacation), prices of pharmaceutical preparations did not increase at all. Similarly, they remained flat in today’s PPI release for June.

Prices for final demand goods (less food and energy), and prices for all final demand health services were either flat or down in June. Similarly, price changes of health services for final demand were all lower than price changes for final demand services overall. The same was true for both goods and services for intermediate demand.

For the last 12 months, prices of health goods and services (especially pharmaceutical preparations) have increased significantly more than prices of other goods and services, but the trend of disproportionately high health price increases might be breaking down.

(See Table I below the fold.)

Health Services Jobs Still Dominate Employment Growth

BLSLast Friday’s thrilling jobs report, which drove the stock market to new highs, continued to be dominated by growth in health services jobs. Indeed, breathless media coverage disguised that monthly job growth followed a miserable May report (which was actually revised downward last Friday).

Health services added just 39,000 jobs in June, significantly fewer than July. Nevertheless, those comprised 13 percent of 287 thousand civilian non-health, non-farm jobs added (Table I). The warping of our economy towards the government-controlled health sector continues.

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More Evidence Against Health Insurance

doctor-mom-and-sonDavid Lazarus of the Los Angeles Times, whose columns on health policy tilt heavily towards single-payer advocacy, has done a great service to the cause of consumer-driven health care, describing how much more sense it makes to pay cash prices for health services than pay what your health insurer “negotiates.”

Five blood tests were performed in March at Torrance Memorial Medical Center. The hospital charged the patient’s insurer, Blue Shield of California, $408. The patient was responsible for paying $269.42.

Tests that were billed to Blue Shield at a rate of about $80 each carried a cash price of closer to $15 apiece.

This is one of the dirty little secrets of healthcare,” said Gerald Kominski, director of the UCLA Center for Health Policy Research. “If your insurance has a high deductible, you should always ask the cash price.”

Not all medical facilities will be open to sharing their cash prices with an insured person, Kominski said, but many will.

As Health Care Spending Slows; Out-of-Pocket Hospital Bills on the Rise

NHENational health care expenditures increased just under 3 percent annually during the 4-year period, 2009 to 2013. Many attribute that slow growth to the recession. But some experts believe there are other forces at work. During this same period, out-of-pocket expenditures for inpatient care rose by about 6.5 percent annually. Deductibles have about doubled over the past decade. A study in JAMA found that cost-sharing for the average hospital stay was about $738 in 2009. This had increased to $1,013 by 2013. Background here and here.

Much of the money spent in health care are spent on hospital care, accounting for nearly one-third (about 30 percent). When Americans enter the hospital, they are responsible for only about 3 percent to 4 percent of the cost out-of-pocket. As patients out of pocket costs rise, they may take steps to avoid expensive hospital stays. Basically, I would argue that a significant portion of the recent slowdown in medical spending can be attributed to rising patient cost-sharing. For a breakdown of where our health care dollars are spent, see Figure.

 

 

Health Services 50 Percent of GDP Growth

This morning’s third estimate of GDP for the first quarter significantly increased the estimate of health spending, such that it comprised one half of GDP growth in the first quarter.

Spending on health services continue to dominate weak GDP growth. Growth in health services spending of $33.3 billion (annualized) comprised 50 percent of GDP growth. However, there was shrinkage in personal consumption expenditures on goods and private domestic investment. This meant personal expenditures on services grew much more than GDP overall. Growth in spending on health services amounted to 62 percent of growth in personal consumption expenditures and 35 percent of spending on services. Spending on health services grew by 6.4 percent, almost twice as much as growth in spending on non-health services (Table I).

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