Category: Health Care Costs

Health Jobs Dominate Terrible Jobs Report

No good words were used to describe last week’s Employment Situation Summary: “Every aspect of the September jobs report was disappointing,” wrote Michelle Girard, chief U.S. economist at RBS (quoted in Forbes). This is largely a repeat of the August jobs report, although those and previous months’ figures were also revised downwards.

One quarter of September’s new jobs were in health services: 34,000 of 142,000 added to nonfarm payrolls (see Table II). Of those 34,000 health jobs, 37 percent were in ambulatory facilities, and 45 percent in hospitals. This is a change from the last few months. Because of a long-term shift in the location of care, there are now almost seven million people working in ambulatory settings, versus just under five million working in hospitals.

Health Spending Increasing Share of GDP

BEALast week’s third estimate of Gross Domestic Product for the second quarter confirms that growth in health spending might be moderating somewhat from its initial Obamacare fueled rush. Unfortunately, it is not a clear break in the trend of health spending consuming an increasing share of our national income.

Current GDP grew $264.4 billion, or 1.5 percent, from Q1 (Table I). One tenth of this, $25.2 billion was health services. At this rate, health services grow in line with their share of GDP. However, if we look over the entire year from 2014, Q1, we note a trend that seems to be persisting, despite last quarter’s moderate grow (Table II). At $110.13, health services spending accounted for 17 percent of GDP growth over the four quarters. The rate of growth was 5.69 percent, in excess of current GDP growth.

Employee Benefit Costs on a “Winning Streak”?

Mercer, a leading firm of consulting actuaries, tells us that the cost of employee benefits in 2016 will grow slowly – a “winning streak”:

Early responses from a major Mercer survey still in the field show employers predicting that health benefit cost per employee will rise by 4.2% on average in 2016 (see Fig. 1) after they make planned changes such as raising deductibles or switching carriers.


A closer look indicates no real reduction in the rate of cost growth of employee benefits.

Health Plan Deductibles Grew Seven Times Faster Than Wages

The Kaiser Family Foundation has just released its 2015 Employer Benefits Survey:


Hillary’s Tweet Crushes Hopes and Dreams

Hillary Clinton has tweeted a teaser for her forthcoming proposal to lower prescription drug prices. Here it is:

HRC Tweet

This short tweet immediately hit biotech stocks, according to Bloomberg:

Consumer Price Index: Amid Disinflation, Medical Prices Increasing

BLSYesterday’s Consumer Price Index (CPI) release confirmed prices of medical goods and services continue to rise at a steady pace, despite the general deflationary environment. The CPI declined 0.1 percent from July to August (seasonally adjusted), and increased just 0.2 percent in the last twelve months.

Much of the disinflation is caused by dropping energy prices. Excluding food and energy, the CPI increased 0.1 percent last month and 1.8 percent over the last twelve months. Medical care, although flat last month, increased 2.5 percent over the last twelve months (see Table I). This is moderate by historical standards, but still excessive relative to current CPI.

PPI: Gap in Hospital Inpatient & Outpatient Prices

BLSAugust’s Producer Price Index was flat, month on month, and dropped 0.8 percent, year on year, continuing the trend we saw last month. Producer prices for health goods and services are rising faster than other producer prices (see Table I).

20150911 TI

Hospital Margins Up 9 Percent

This morning’s Quarterly Services Survey (QSS), published by the Census Bureau, reported that:

The estimate of U.S. health care and social assistance revenue for the second quarter of 2015, not adjusted for seasonal variation, or price changes, was $591.3 billion, an increase of 2.2 percent (± 0.8%) from the first quarter of 2015 and up 6.4 percent (± 1.3%) from the second quarter of 2014. The fourth quarter of 2014 to first quarter of 2015 percent change was revised from -0.4 percent (± 1.1%) to -0.5 percent (± 1.1%).

The QSS adds important information to the more widely reported quarterly Gross Domestic Product (GDP) and Employment Situation Summary (ESS) releases that I frequently discuss on the blog.

A Welcome Break – Moderate Health Spending Growth in Q2 GDP

Last week’s second estimate of Gross Domestic Product for the second quarter confirms that growth in health spending took a welcome break. Unfortunately, it is not a clear break in the trend of health spending consuming an increasing share of our national income.

When we compare 2015 Q2 to 2014 Q2 annualized spending, health care is still consuming a slightly disproportionate share of GDP. Health spending grew $106 billion, comprising 17 percent of the $632 billion change in GDP. GDP only grew 3.66 percent, while health spending grew 5.47 percent.

Health-Related Producer Prices Tame in July

BLSThe Producer Price Index (PPI) for July increased more than expected, but was still benign. Health-related producer prices were tame last month.

Prices for pharmaceutical preparations, which have increased faster than other producer goods in the long term (rising 9.4 percent since July 2014), finally turned around and actually dropped 0.4 percent last month (See Table I). This was a bigger decline than prices for all final demand goods (-0.1 percent) or for all final demand (0.2 percent).