January 2020 Health Sector Economic Indicators Briefs

Spending: Hospital spending growth continues to drive national health spending acceleration – are we poised for an unwelcome acceleration in health care spending?

• In November 2019, year-over-year national health spending growth increased for the fourth consecutive month, from 4.2% in July to its current growth rate of 5.4%, the latter being the highest growth rate since March 2019. However, strong GDP growth, though lower than in 2018, kept the health spending share of GDP stable at 17.9% in November. This share has not exceeded 18% since May 2016, the only month in our time series in which it slightly surpassed the 18% mark.
• At $3.90 trillion (seasonally adjusted annual rate), national health spending in November 2019 was 5.4% higher than in November 2018 (Note that while laypersons often say that U.S. health care spending is 3 trillion dollars, it is now much closer to $4T than 3!).
• Spending in November 2019, year over year, increased in all major categories. Spending on hospital care grew the fastest, at 7.7%. Growth in spending on home health care was the slowest, at 2.5%.

Labor: Health care created 400,000 jobs in 2019, nearly one in five of the 2.1 million jobs created overall – are health care providers hoarding workers for a boom that seemingly has no end? There was no expansion in health care coverage driving a need for more health care workers in 2019, but there has been early evidence of increased use of health care services.

• Health care closed the year adding 28,000 jobs, for an average of 33,000 new jobs per month, comparable to the post-coverage-expansion years of 2015 and 2016, with health employment growing by 2.5% year-over-year in each of those years
• About two-thirds of new health jobs were in ambulatory care settings and about one-quarter were in hospitals (including hospital-based ambulatory settings). Nursing home employment declined while other nursing and residential care jobs grew modestly
• Year over year (December 2019 compared to December 2018), health jobs grew by 2.5%, compared to non-health jobs at 1.4%. The health share of total jobs is at 10.88%, the current all-time high

Prices: Health care price growth ticks up; drug prices spike to 3.0% annual rise; are we on the cusp of accelerating overall health care prices and drug prices? The final 3-months of 2019 show high growth. 

• Health care prices in December 2019 rose 1.9% from December 2018, up a tenth from the November annual rate of 1.8%. Average prices for the year were up a modest 1.6%
• Year-over-year hospital price growth was 2.1%, down from 2.4% in November. Annual physician price growth remained at 0.6%. Annual drug price growth was 3.0% in December, the third straight positive reading and its highest rate since June 2018
• On an annual basis, the Medical Care Price Index (MCPI) rose 4.6% in December, up from 4.2% in November, and the highest growth rate since September 2016. This is likely reflecting higher drug price growth and is, in any case, not a welcome sign for consumers Implicit per capital health care utilization (personal health care spending growth minus pure price growth, per person) increased in 2019 compared to 2018 (2.9% vs. 1.7%).