November 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 the November 2019 briefs: 

Prices: Health care price growth surges on hospital prices; Rx prices rise after 5 months

• In October 2019, annual growth in the Health Care Price Index (HCPI) was 2.0%, up three-tenths from the September rate, and the highest reading since June 2018. The main factor was clearly annual hospital price growth, up 2.8%, the highest rate since March 2013. In turn, this was driven by private hospital price growth of 4.4%—the highest rate since the private only series was created in 2014. 
• The annual price growth for prescription drugs rose dramatically from -1.1% in September to 1.0% in October. This was the first positive annual reading since April 2019 and the highest rate since September 2018. Nonetheless, the 12-month moving average of -0.5% (equal to the September rate), remains the lowest since 1972.
• The historically long streak of 27 months whereby economy-wide prices have grown more quickly than health care prices appears to be ending. If so, this would revert to the normal situation and it would once again mean that health care price growth is contributing to higher economy-wide price growth. 
• Two items bear scrutiny when the November data are released: does the private hospital price growth of 4.4% represent a (bad) trend and why is the Medical CPI rising so quickly (4.3%—the highest since September 2016)? U.S. health care prices are high but continued low growth has brought some relief. With October’s spurt, is this situation reversing?

Spending: Hospital spending growth uptick contributes to health spending acceleration

• At $3.88 trillion (seasonally adjusted annual rate), national health spending in September 2019 was 4.9% higher than it was in September 2018. The September 2019 nominal gross domestic product (GDP) growth over a 12-month period was 4.1%, and the resulting health spending share of GDP was 18.0%. (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 September 2019, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 8.0%. Growth in spending on home health care was the slowest, at 1.9%.
• The growth rate for the first 9 months of 2019 also stands at 4.9%, which is nearly equal to our estimate of health spending growth of 4.8% for all of 2018. While still moderate, September’s growth exceeds year-over-year GDP growth for the month by 0.8%, the largest excess growth rate since January 2017. (We expect the official National Health Expenditure Accounts data for 2018 to be released in the 1st week of December 2019.)
• Spending acceleration stems from an acceleration in hospital spending growth to 5.6% in September. Large, for-profit hospital systems are reporting recent volume growth that they expect to continue through the year, though the causes are unclear.

Labor: Low October growth may signal slowing but 2019 still a strong year for health hiring  

• Health care added a modest 14,600 jobs in October, less than half the 12-month average of 33,500.
• Slower growth was seen in both hospitals and ambulatory settings. Hospitals added 2,100 jobs in October (12-month average 7,600), while ambulatory care settings added 7,800 jobs (average 22,900).
• Year over year (October 2019 compared to October 2018), health jobs grew by 2.5% while non-health jobs grew at 1.3%. The health share of total jobs is at an all-time high of 10.86%.