Cruising at a Higher Altitude for Now

Staff portrait of Kathy Hempstead

Katherine Hempstead, PhD, MA, director and senior program officer, leads RWJF's work on health insurance coverage.

Specialty pharma levels off, growth in health service prices stays low, but utilization and jobs are on the rise.

This latest monthly trend report, produced by the Altarum Center for Sustainable Health Spending, builds upon data from ongoing monthly Health Sector Economic Indicators and provides further analysis of the latest findings from the Census Bureau’s Quarterly Services Survey. This report provides estimated data for the first quarter of 2015. The increased rate of growth in health spending noted in the latter part of 2014 has persisted into the first quarter of 2015, as Altarum estimates growth in National Health Expenditures at 6.6 percent, a touch higher than the 6.2 percent reported for the fourth quarter of 2014.

However, there are reasons to think that growth in health spending may fall off a bit as 2015 progresses. This may occur in part because the spending on one major driver, specialty pharma—largely Hepatitis C therapies—has stabilized. Sales of Hepatitis C therapies rose only slightly in the first quarter of 2015. More aggressive formulary negotiations may have put some pressure on prices, and more importantly, utilization growth should now more closely track the natural growth in disease prevalence. A second reason for increased health spending—coverage expansion—appears to be growing at a slower rate and may have a diminished impact on overall spending in 2015.

These first-quarter data show that there was a continued growth in spending on health care services, which appears to be led by utilization rather than prices.  Altarum estimates that spending on services grew 6.2 percent in the first quarter of 2015, an increase over the 4.1 percent reported in the fourth quarter of 2014. It would appear this growth was primarily comprised of increased utilization, since health care service prices grew by an anemic 0.6 percent in the quarter, even lower than the 1.3 percent noted in the fourth quarter of 2014.

Job growth in health care continues at a healthy clip, with an average of 34,000 new jobs per month in the first four months of 2015. The combination of increased utilization, low growth in service prices, and significant job growth suggest that upward pressure on wages is not a factor, or that perhaps the delivery system is making greater use of lower cost labor to meet increased demand. The recent announcement of wage increases at Ascension however, may be a sign that the labor market is finally starting to tighten.

 

About the series

Kathy Hempstead provides commentary on the Altarum Center for Sustainable Health Spending’s monthly trend reports. With funding from the Robert Wood Johnson Foundation, these trend reports provide a monthly summary of key trends in health care spending, prices, utilization, and employment.