Category: Health Care Costs

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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Transparency Tools Work — but Require Appropriate Incentives

A recent New York Times article by Reed Abelson blames the slow adoption of online transparency tools on “health care’s complexity.” Abelson argues… “It is impossible to know, for example, whether a dermatologist who costs twice as much as another can more successfully diagnose skin cancer.” The article briefly mentions the case study of two large employers who found online transparency tools did not reduce consumer spending.

The Real Lesson of John Oliver’s Medical Debt Forgiveness Stunt

money-burdenLate-night TV host John Oliver recently caused a stir by attacking debt collectors in a clever way. He set up his own collection agency, bought $15 million of medical bad debt, and then forgave it all. This was all done on TV, to the cheers of his audience.

Oliver claimed to have outdone Oprah Winfrey, who once gave a car to each person in her studio audience. Oprah’s car give-away cost $8 million, just over half of Oliver’s. So, Oliver wins the charitable ego competition, right?

Nope. Oliver did not forgive $15 million of medical debt. That was the face amount of the accounts receivable. He bought them for about half a cent on the dollar, or about $60,000 total. The lesson of Oliver’s stunt is that medical accounts receivable are very hard to collect. That is why they trade so cheaply in the secondary debt market.

QSS: Strong But Inconsistent Health Services Revenue Growth

Census2This morning’s Quarterly Services Survey from the Census Department showed good growth in revenues for health services, but it was inconsistent within the industry. Overall, first quarter revenue grew 0.7 percent from the fourth quarter and 5.2 percent from the first quarter of 2015 (Table I).

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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.)