Category: Health Care Costs

Eight Thousand Non-Health Jobs Lost in May

BLSThe true scope of this morning’s miserable jobs report is disguised by the headline figure of 38,000 jobs gained. In fact, health services added 46,000 jobs while civilian non-health, non-farm employment dropped eight thousand (Table I). The warping of our economy towards the government-controlled health sector has reached the tipping point I have suggested for months.

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Health Services 30 Percent of GDP Growth

BEAThis morning’s second estimate of GDP for the first quarter was a little stronger than last month’s advanced estimate, although much of the adjustment was a smaller decrease in inventories than initially estimated.

Spending on health services continue to dominate weak GDP growth. Health services spending of $19.2 billion (annualized) comprised 30 percent of GDP growth. However, there was shrinkage in personal consumption expenditures on goods, private domestic investment, and exports. This meant personal expenditures on services grew much more than GDP overall. Growth in spending on health services amounted to a little less than one fifth of growth in services spending. Nevertheless, the quarterly growth in spending on health services indicates health services continues to consume a disproportionate share of (low) growth (Table I).

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CPI: Medical Inflation Finally Under Control

BLSThe Consumer Price Index (CPI) for April confirmed medical inflation is matching the broad measure of price changes. For the second month, price changes for medical care (0.3 percent) were in line with all-items (0.4 percent). Although, it looks like a jump in energy prices drove the CPI up. If energy price increases moderate, we can expect prices for medical care to increase faster than CPI.

With respect to medical commodities, it prices of prescription drugs continued to increase faster than other medical commodities or commodities over all. Although, pharmaceutical price hikes in the CPI are not as big as in the Producer Price Index. Prices for many health goods and services actually dropped.

However, over the last twelve months, medical prices faced by consumers have grown much faster than non-health prices: 3.0 percent versus 1. percent. Prescription prices increased 4.0 percent, as did prices for inpatient hospital services. Health insurance increased 5.8 percent.

(See Table I below the fold.)

PPI: Pharma Price Hikes Continue To Stand Out

BLSThe Producer Price Index (PPI) for final demand goods grew 0.2 percent last month, or 0.3 percent less food and energy. Prices for pharmaceutical preparations and most medical devices grew significantly faster, at 1.0 percent and 0.5 percent, although prices for X-Ray and similar equipment were flat.

With respect to final demand services, for which prices rose 0.1 percent (or 0.3 percent, less trade, transportation, and warehousing), prices of medical services changed similarly. However, prices for health insurance jumped 0.8 percent.

With respect to goods for intermediate demand, which dropped 0.3 percent, price increases for biologics, including diagnostics, stood out at 2.5 percent. With respect to services for intermediate demand, which rose 0.1 percent, prices for health insurance jumped 0.8 percent

Looking back over the 12-month period, the price increase of 10.4 percent for pharmaceutical preparations continues to stand out like a sore thumb. Political agitation against drug prices is unlikely to go away soon. Health insurance, having risen 1.7 percent in a flat or negative inflationary environment, is also beginning to stand out. (See Table I below the fold.)

Federal Health Bureaucracy Growing? Don’t Blame (Just) Obamacare

Libertarians and conservatives and others have spent five years complaining about the increased bureaucratic burden of Obamacare. New research by Sam Batkins of the American Action Forum, while not letting Obamacare off the hook, shows the problem predates the current Administration. The following chart shows the burden of paperwork has increased linearly since at least 2005:

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Another Hit On Price Transparency

HSAJAMA, the Journal of the American Medical Association, has published a research article challenging the doctrine that price transparency leads to lower health costs. Sunita Desai, et al., found:

Two large employers represented in multiple market areas across the United States offered an online health care price transparency tool to their employees. One introduced it on April 1, 2011, and the other on January 1, 2012. The tool provided users information about what they would pay out of pocket for services from different physicians, hospitals, or other clinical sites.

Mean outpatient spending among employees offered the tool was $2021 in the year before the tool was introduced and $2233 in the year after. In comparison, among controls, mean outpatient spending changed from $1985 to $2138. After adjusting for demographic and health characteristics, being offered the tool was associated with a mean $59 (95% CI, $25-$93) increase in outpatient spending.

Ouch! Let me make a couple of points. First, higher out-of-pocket spending might not be associated with higher health spending overall. If the price-transparency tools give patients confidence they understand their potential financial liability when going to doctors, that might encourage them to go rather than wait. If that increases timeliness of care, total health costs might go down while out-of-pocket costs go up. This is supported by previous research.

Health Jobs Grow More Than Three Times Faster Than Other Jobs

BLSHealth services jobs grew over three times faster than non-health, nonfarm civilian jobs in April. Health services jobs comprised 44,200 (28 percent) of 160,000 jobs added. The rate of growth from March was 0.29 percent for health services jobs versus only 0.09 percent for other jobs (Table I).

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Wrong Way for Consumer-Driven Health Care?

Peterson KaiserGary Claxton and colleagues, of the Kaiser Family Foundation, have written a concise analysis of the evolution in health payments from 2004 through 2015:

From 2004 to 2014, the average payments by enrollees towards deductibles rose 256% from $99 to $353, and the average payments towards coinsurance rose 107%, from $117 to $242, while average payments for copays fell by 26%, from $206 to $152.  Overall, patient cost-sharing rose by 77%, from an average of $422 in 2004 to $747 in 2014. During that period, average payments by health plans rose 58%, from $2,748 to $4,354. This reflects a modest decline in the average generosity of insurance – large employer plans covered 86.7% of covered medical expenses on average in 2004, decreasing to 85.3% in 2014. Worker’s wages, meanwhile, rose by 32% from 2004 to 2014.

I would quibble with Claxton, et al’s use of the noun “generosity” to describe the share of health costs paid by insurers. Insurers pass costs through: Claims they pay are covered by premiums, which are charged to either beneficiaries or employers. If the latter, beneficiaries pay through lost wages. Plus, because claims processed and paid by insurers add administrative costs (“load”) to the costs of actual medical care, total health costs are higher. Quibbling aside, the analysis gives great insight into how the way we pay for health care has changed.

Flash GDP: Health Services Over One Third of GDP Growth

BEAThis morning’s advance (flash) estimate of GDP for the first quarter (usually subject to significant future revision) showed very weak growth dominated by spending on health services. Health services spending of $19.5 billion (annualized) comprised over one third of GDP growth. However, there was shrinkage in personal consumption expenditures on goods, private domestic investment, and exports. This meant personal expenditures on services grew almost twice as much as GDP growth. Growth in spending on health services amounted to a little less than one fifth of growth in services spending. Nevertheless, the quarterly growth in spending on health services indicates health services continues to consume a disproportionate share of (low) growth (Table I).

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CPI: Most Medical Price Hikes Stall

BLSThe Consumer Price Index for March indicates that medical price inflation matched changes in other prices charged to consumers, with a slight uptick of 0.1 percent. Prescription drugs (0.5 percent increase), nursing homes and adult day care, eyeglasses, and health insurance (all with 0.4 percent increases) stood out as continuing to experience higher inflation than other items. Prices for many health goods and services actually dropped.

However, over the last twelve months, medical prices faced by consumers have grown much faster than non-health prices: 3.3 percent versus 0.6 percent. Prescription prices increased 3.4 percent. However, inpatient hospital services and health insurance prices increased much faster, by 5.9 percent and 6.0 percent.

When we compare the medical components of the CPI with those in the Producer Price Index, it appears that hospitals, not drug makers, are shifting more prices directly onto consumers.

(See Table I Below the fold.)