February 2020 Health Sector Economic Indicators Briefs

Note to readers: HSEI was delayed this month due to late Producer Price Index release (2/19/20).

Spending: Health spending acceleration leads to highest growth rate since August 2015; earlier spending pressure concern borne out by new data.

• At $3.92 trillion (seasonally adjusted annual rate), national health spending in December 2019 was 5.7% higher than in December 2018. This spending rate puts us “only” $80 billion away from hitting $4 trillion! 
• For the fifth straight month, national health spending has accelerated, with year-over-year growth increasing from 4.2% in July to 5.7% in December. December’s growth rate is the highest since August 2015 and has resulted in health spending slightly exceeding 18% of GDP for the first time since May 2016.
• Spending in December 2019, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 11.7%. Growth in spending on physician and clinical services was the slowest, at 2.9%

Labor: Strong health care job growth continues into 2020. Continuing aggressive hiring may now be a function of accelerating utilization.

• The health care sector started 2020 with a continuation of the robust hiring seen in 2019, adding 35,500 new jobs in January. January data also reflect BLS’s annual benchmark revisions to the “establishment” survey, which lowered the estimated level of health care employment by 145,000 jobs, a 0.03% reduction.
• Nonetheless, these revisions did not change the story of 2019 as a strong year for health care hiring. Health care added about 350,000 jobs in 2019, much higher than the roughly 250,000 added in 2017 and 2018, and closer to the post-expanded coverage years of 2015 and 2016, when about 375,000 new jobs per year were added.
• Jobs were added across all major health care settings, with hospitals adding nearly 10,000 jobs, ambulatory care settings adding nearly 23,000 jobs, and nursing and residential care adding nearly 3,000 jobs.
• Year over year (January 2020 compared to January 2019), health jobs grew by 2.2%, compared to non-health jobs at 1.3%. The health share of total jobs is at 10.82%, the new all-time high.

Prices: Hospital prices drive health care price growth above 2%; Rx prices up 2.5%. Another month of data indicates we are seeing accelerating overall health care prices.

• Health care prices in January 2020 rose 2.1% from January 2019, up a tenth from the December annual rate of 2.0%.
• Year-over-year hospital price growth surged to 2.7% in January from 2.1% in December. Annual physician price growth rose to 0.8%, and annual drug price growth was 2.5% in January, the fourth straight positive reading after negative growth in 2019.
• The Medical Care Price Index showed 4.5% annual growth in January, only a tenth below the December rate, which was the highest since September 2016. This includes 20.5% annual growth in health insurance, a function of an indirect estimator used by the Bureau of Labor Statistics that appears to be emphasizing the Health Insurance Fee that, while eliminated in 2021, was brought back to life for 2020.
• Implicit per capital health care utilization (personal health care spending growth minus pure price growth, per person) showed growth year over year at 3.6% in December—four tenths above its 12-month average.