October 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 October 2019 briefs: 

Spending: Moderation in hospital and physician spending growth continues

• At $3.87 trillion (seasonally adjusted annual rate), national health spending in August 2019 was 4.5% higher than it was in August 2018. The August 2019 nominal gross domestic product (GDP) growth over a 12-month period was 4.3%, and the resulting health spending share of GDP was 17.9% 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 August 2019, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 8.5%. Growth in spending on home health care was the slowest, at 1.5%.
• The overall 4.9% growth rate in national health spending for the year to date continues to track closely with the CMS forecast of 4.8% for the entire year.
• Spending moderation is largely attributable to growth in spending on hospital care and physician and clinical services, which together account for more than 50% of national health spending. Year-over-year growth in hospital spending was 4.4% in August, down from a peak for the year of 6.8% in March. Year-to-date growth in hospital spending is 5.5%.

Labor: Through Q3, more than one in five new jobs in 2019 are in health care

• Health care added a strong 38,800 new jobs in September, just above the 12-month average of 35,200.
• Hospitals added 8,100 jobs in September, around the 12-month average of 8,500, while ambulatory care settings added 28,700 jobs, a bit above the average of 23,900.
• Year over year (September 2019 compared to September 2018), health jobs grew by 2.6%, twice as fast as non-health jobs at 1.3%, raising the health share of total jobs to a new all-time high of 10.87%.

Prices: Health care price growth ticks up but remains below economy-wide inflation

• In September 2019, annual growth in the Health Care Price Index (HCPI) was 1.6%, up a tenth from the August rate. Increases in the rates for hospitals (from 2.0% to 2.3% annual rate in September) and physicians (from 0.5% to a still low 0.8%) likely drove this small increase in the HCPI.
• The annual price growth for prescription drugs fell from -0.7% to -1.1%. We have seen incredibly low growth in prescription drug prices since July 2018, and the 12-month moving average now stands at -0.5%—a 47-year low. But, the prices for many high-profile drugs are not falling, and considerable consternation persists around the level of drug prices.
• Health care prices (excepting “intensity”), continue to grow more slowly than economy-wide prices, as they have for a historically long streak of 26 months as of August 2019. It is little appreciated over this period that health care price growth has been contributing to lower economy-wide price growth. Health care inflation is amazingly low for this stage of the economic recovery. September 2019 was the 123rd month of expansion (the longest in U.S. history) following the Great Recession, yet the HCPI growth is anchored below 2%.