Category: Health Care Costs

GDP: Strong Health Spending In Weak Report

BEAFor those (like me) concerned about how much health spending continues to increase after Obamacare, today’s second report of fourth quarter Gross Domestic Product shows concern is still warranted. Because of revisions to the advance estimate, health spending accounted for a greater share of GDP than we had thought.

Overall, real GPD increased 1.8 percent on the quarter, while health services spending increased 5.6 percent, and contributed 36 percent of real GDP growth. Growth in health services spending was much higher than growth in non-health services spending (0.3 percent) and non-health personal consumption expenditures (2.4 percent). However, the implied annualized change in the health services price index increased by just 1.6 percent, lower than the price increase of 2.4 percent for non-health services, 2.0 percent for non-health PCE, and 2.1 percent for non-health GDP.

(See Table I below the fold.)

Health Spending & Prices to Rise Through 2025

Actuaries at the Centers for Medicare & Medicaid Services, a government agency, have just updated their estimate of future health spending:

For 2018 and beyond, both Medicare and Medicaid expenditures are projected to grow faster than in the 2016–17 period, and more rapidly than private health insurance spending, for several reasons. First, growth in the use of Medicare services is expected to increase from its recent historical lows (though still remain below longer-term averages). Second, the Medicaid population mix is projected to trend more toward somewhat older, sicker, and therefore costlier beneficiaries. Third, baby boomers will continue to age into Medicare, with some of them dropping private health insurance as a result. And finally, growth in the demand for health care for those with private coverage is projected to slow as the relative price of health care—the difference between medical prices and economywide prices—is expected to begin gradually increasing in 2018 and as income growth slows in the later years of the projection period.

Lifetime HSAs: The ‘Antisocial’ Health Reform that’s Good for You!

DocsMeanIn an ideal world, people would save for retirement, have an emergency fund and save for future health care needs. A mandatory payroll tax dedicated to your health care would be the ideal way to fund your future medical needs. Singapore has such a system, called MediSave accounts. Liberals consider personal accounts to be antisocial, since money in one account cannot be diverted to someone else’s medical needs. However, a dose of antisocial selfishness would benefit our health care system.

Health Prices Up Two Thirds Less Than CPI

blsThe Consumer Price Index rose 0.6 percent in December, while medical prices rose only 0.2 percent. This is the fifth month in a row we have enjoyed medical price relief in the CPI. Even prices of prescription drugs rose by only 0.3 percent. Prices of three components – medical equipment and supplies, dental services, and care of invalids and elderly at home even dropped. No category rose more than 0.1 percentage point more than all item CPI. Medical price inflation contributed only three percent of CPI for all items.

Over the last 12 months, however, medical prices have increased much more than non-medical prices: 3.9 percent versus 2.4 percent. Price changes for medical care contributed 13 percent of the overall increase in CPI.

See Figure I and Table I below the fold:

PPI: Health Prices Mixed Amidst Inflation

blsJanuary’s Producer Price Index rose 0.6 percent. However, prices for many health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.* Prices for six of the categories of health goods and services deflated in absolute terms.

The outlier was pharmaceutical preparations for final demand, which increased by 1.1 percent (0.7 percentage points more than final demand services (less trade, transportation, and warehousing.) The largest decline (relative to its benchmark) was for prices of health and medical insurance for intermediate demand, which declined by 0.8 percentage points versus services for intermediate demand (less trade, transportation, and warehousing).

With respect to diagnosing whether health prices are under control, the January PPI is more mixed than December’s was. Nevertheless, although pharmaceutical prices stand out, most excess inflation is in health services, not goods.

See Table I below the fold:

Slow Growth, Downward Revision in Health Jobs

blsLast month’s job report showed an explosion in health jobs versus non-health jobs. Revisions to previous data in this morning’s very strong jobs report indicate those data were not correct.

Health jobs increased only 0.12 percent in this morning’s jobs report, versus 0.16 percent for non-health jobs. With 18,000 jobs added, health services accounted for only eight percent of new nonfarm civilian jobs.

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

Ambulatory sites added jobs at a much faster rate than hospitals (0.41 percent versus 0.21 percent). This was concentrated in outpatient care centers and home health. This is a good sign because these are low-cost locations of care.

See Table I below the fold:

Private Sector Health Benefits Grew 17 Percent Faster Than Wages Last Year

blsReleased yesterday, the Bureau of Labor Statistics quarterly Employment Cost Index showed private sector health benefits increased 2.7 percent in 2016, versus only 2.3 percent for wages.

Overall, private-sector benefits grew only 1.8 percent, indicating non-health benefits would have grown little if at all. State and local government workers’ benefits grew 3.1 percent, 72 percent faster than private-sector benefits!

Bernie Sanders’ Single-Payer Utopia

Back in October I wrote “Is Obamacare’s Failure Intentional, to Promote Medicaid-for-All?”  In it I discussed how Bernie Sanders famously advocated for single-payer socialized medicine during his campaign. In 2011, the Vermont legislature passed a bill to create a single-payer initiative known as Green Mountain Care. In 2014 it was abandoned by Vermont’s governor — a Democrat — as being too costly. Green Mountain Care was going to require an 11.5 percent payroll tax and an additional sliding-scale income tax that topped out at 9.5 percent. Despite the heavy tax burden, a single-payer system in Vermont was projected to run deficits by 2020.

GDP: Tame Health Spending In Weak Report

BEAFor those (like me) concerned about how much health spending continues to increase after Obamacare, today’s flash report of fourth quarter Gross Domestic Product confirmed good news.

Overall, real GPD increased 1.9 percent on the quarter, while health services spending increased only 1.6 percent, and contributed only 10 percent of real GDP growth. Growth in health services spending was somewhat higher than growth in non-health services spending (1.2 percent) but significantly lower than non-health personal consumption expenditures (2.7 percent). Further, the implied annualized change in the health services price index increased by just 1.5 percent, lower than the price increase of 2.4 percent for non-health services, 2.3 percent for non-health PCE, and 2.2 percent for non-health GDP.

(See Table I below the fold.)

CPI: Moderate Health Price Increases

blsThe Consumer Price Index rose 0.3 percent in December. Medical prices rose only 0.2 percent. This is the fourth month in a row we have enjoyed medical price relief. Even prices of prescription drugs rose by only 0.2 percent. Prices of health insurance even dropped a smidgeon!

Prices for medical care commodities rose the most, by 0.6 percent, followed closely hospital services (0.3) percent).

Over the last 12 months, however, medical prices have increased over twice as fast as non-medical prices: 1.9 percent versus 4.1 percent. Price changes for medical care contributed 16 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.)