August 2019 Health Sector Economic Indicators Briefs

These monthly briefs analyze the most recent data available on health sector employment, spending, prices, and utilization—helping to fill gaps in the official government data.

Below are highlights from this month's reports:

Spending: Data updates reveal higher spending growth in 2018 and early 2019

• At $3.83 trillion (seasonally adjusted annual rate), national health spending in June 2019 was 4.6% higher than it was in June 2018. The June 2019 nominal gross domestic product (GDP) growth over a 12-month period was 4.3%, and the resulting health spending share of GDP was 18.0% and 18.1% of PGDP. (Note that while laypersons often say that U.S. health care spending is 3 trillion dollars, it is now much closer to 4 than 3)
• Spending in June 2019, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 7.8%. Growth in spending on dental services was the slowest, at 1.9%.
• On July 30, the US Bureau of Economic Analysis (BEA) released the 2019 annual update to BEA’s monthly National Income and Product Account (NIPA) tables, with revisions for the years 2014 through 2018. The update resulted in an increase in estimated year-over-year national health spending growth for all of 2018 from its previous value of 4.5% to 4.8%. For the first quarter of 2019, our previous growth rate of 4.6% now stands at 5.1%.
• The higher growth rates are driven primarily by changes to the growth in hospital spending, which accounts for 33% of national health spending.

Labor: Health sector adds 30K jobs, consistent with first half of 2019 and 12-month average

• Health care added 30,400 new jobs in July, similar to June 2019 growth, and consistent with the 12-month average of 33,800.
• Hospitals lost 2,000 jobs in July. Nearly all health job growth was in ambulatory care settings, which added 28,900 jobs, mostly in home health (10,700) and “other ambulatory care” (12,800).
• Year-over-year (July 2019 compared to July 2018), health jobs grew by 2.5% while non-health jobs grew by 1.4%. The health share of total jobs is at a new high of 10.84%.

Prices: With drug prices still falling, health care price growth stays at low 1.4% rate

• In July 2019, annual growth in the Health Care Price Index (HCPI) was 1.4%, the same as the June rate. While the overall index stayed constant, price growth for hospitals fell a tenth to 2.1%, the physician rate fell sharply to a very low 0.2% from an already low reading of 0.8% in June, other non-durable medical products saw price growth rise from -0.2% to 0.5%, durable medical equipment price growth fell from 2.4% to 1.5%, and the annual price growth for prescription drugs “rose” from -2.0% to -0.8%. We have observed exceptionally slow growth in prescription drug prices since July 2018, and the 12-month moving average now stands at -0.2%—a 46-year low. Nonetheless, all is not rosy in drug-pricing land as this AP story claims that brand-name drug prices are still rising, albeit at a lower rate.
• Overall health care prices are still growing more slowly than economy-wide prices, bringing this historically long streak to 24 months as of June 2019. In any case, this behavior has been stark, and it is still little appreciated that health care price growth no longer drives up economy-wide price growth. Health care inflation is amazingly low for this stage of the economic recovery. July 2019 was the 121st month of expansion (now the longest in U.S. history) following the Great Recession, yet the HCPI growth is stuck well below 2%.

These monthly briefs analyze the most recent data available on health sector employment, spending, prices, and utilization—helping to fill gaps in the official government data.

Below are highlights from this month's reports:

Spending: Data updates reveal higher spending growth in 2018 and early 2019

• At $3.83 trillion (seasonally adjusted annual rate), national health spending in June 2019 was 4.6% higher than it was in June 2018. The June 2019 nominal gross domestic product (GDP) growth over a 12-month period was 4.3%, and the resulting health spending share of GDP was 18.0% and 18.1% of PGDP. (Note that while laypersons often say that U.S. health care spending is 3 trillion dollars, it is now much closer to 4 than 3)
• Spending in June 2019, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 7.8%. Growth in spending on dental services was the slowest, at 1.9%.
• On July 30, the US Bureau of Economic Analysis (BEA) released the 2019 annual update to BEA’s monthly National Income and Product Account (NIPA) tables, with revisions for the years 2014 through 2018. The update resulted in an increase in estimated year-over-year national health spending growth for all of 2018 from its previous value of 4.5% to 4.8%. For the first quarter of 2019, our previous growth rate of 4.6% now stands at 5.1%.
• The higher growth rates are driven primarily by changes to the growth in hospital spending, which accounts for 33% of national health spending.

Labor: Health sector adds 30K jobs, consistent with first half of 2019 and 12-month average

• Health care added 30,400 new jobs in July, similar to June 2019 growth, and consistent with the 12-month average of 33,800.
• Hospitals lost 2,000 jobs in July. Nearly all health job growth was in ambulatory care settings, which added 28,900 jobs, mostly in home health (10,700) and “other ambulatory care” (12,800).
• Year-over-year (July 2019 compared to July 2018), health jobs grew by 2.5% while non-health jobs grew by 1.4%. The health share of total jobs is at a new high of 10.84%.

Prices: With drug prices still falling, health care price growth stays at low 1.4% rate

• In July 2019, annual growth in the Health Care Price Index (HCPI) was 1.4%, the same as the June rate. While the overall index stayed constant, price growth for hospitals fell a tenth to 2.1%, the physician rate fell sharply to a very low 0.2% from an already low reading of 0.8% in June, other non-durable medical products saw price growth rise from -0.2% to 0.5%, durable medical equipment price growth fell from 2.4% to 1.5%, and the annual price growth for prescription drugs “rose” from -2.0% to -0.8%. We have observed exceptionally slow growth in prescription drug prices since July 2018, and the 12-month moving average now stands at -0.2%—a 46-year low. Nonetheless, all is not rosy in drug-pricing land as this AP story claims that brand-name drug prices are still rising, albeit at a lower rate.
• Overall health care prices are still growing more slowly than economy-wide prices, bringing this historically long streak to 24 months as of June 2019. In any case, this behavior has been stark, and it is still little appreciated that health care price growth no longer drives up economy-wide price growth. Health care inflation is amazingly low for this stage of the economic recovery. July 2019 was the 121st month of expansion (now the longest in U.S. history) following the Great Recession, yet the HCPI growth is stuck well below 2%.