A recent NPR report, , shared that healthcare costs are projected to increase next year, but more slowly than in the past. Healthcare spending data from Truven Health shows that hospitals remain at the epicenter of healthcare spending.
Our reports show that hospital spending through Q2 2013 is nearly 4.5% higher than last year. Among all healthcare spending, the low spend is in pharmacy and drugs (1.6 percent), with a moderate spending increase in physician spending (1.6 percent). Since 2006, hospital spending has been the escalator of higher healthcare spending, driven partly by sicker inpatients and the growth of hospital outpatient business, so this is not unusual.
The escalation of hospital outpatient business is reflective of an expanded care continuum by most hospitals, as well as more responsive care delivery to forestalling readmissions and eliminating unnecessary admissions.
VP, Advisory Services
The Wall Street Journal article, "Slowdown in Health Spending Could be at Risk," hints at a flattening of the U.S. healthcare spending curve. Economists have long made the distinction between a one-time change in price and inflation which is an ongoing process. The classic example involves monopoly power. Breaking up a monopoly pricing scheme lowers prices to the consumer, and it happens quickly. This happened with the introduction of a generic substitute for Prozac.
As soon as generic fluoxetine was available, the price fell dramatically. While that, by itself, slowed the growth of healthcare spending, it did nothing to change the underlying trends. The situation is a lot like the hypothetical graph below. The blue line represents an interrupted but not changed underlying trend.
A number of careful analysts have highlighted one-time events that have slowed healthcare spending in the most recent periods. The underlying trends are driven by the aging population, with slowly growing incomes – that is ongoing growth in demand – coupled with limited supply of health professionals. Those underlying factors are only exacerbated by the Affordable Care Act (ACA). The ACA includes a number of potential onetime events to mitigate the underlying trends but it was designed to improve health insurance coverage and not, fundamentally, to lower healthcare costs.
William (Bill) Marder, PhD
SVP Custom Service