SYSTEMS RESEARCH FOR BETTER HEALTH
Center for Sustainable Health Spending
www.altarum.org
Health Sector Economic IndicatorsSM
PRICE BRIEF
May 8, 2013
Insights from Monthly Price Indices through March 2013
Health care price growth continues downward trend
HIGHLIGHTS
Health care prices in March 2013 were 1.6% higher than
in March 2012, one-tenth below the February rise, and the
2nd lowest reading since December 1997’s 1.3% figure. The
12-month moving average at 1.9% is the lowest since 1.8%
recorded in October 1998.
s Year-over-year, hospital prices – a key health price index driver –
rose to 2.7% in March (from 2.6% in February). Physician and
clinical services rose 0.1%, the lowest rate since December 2002,
and rescription drugs saw price growth fall to 0.7% (from 4.0%
as recently as August 2012), the lowest since 0.7% in June 2007.
s Economy-wide price indices plummeted in March: the Consumer Price Index (CPI) fell to 1.5% year-over-year, from 2.0%
in February; the “Finished Goods” Producer Price Index (PPI)
fell to 1.1% from 1.7%; and the gross domestic product (GDP)
deflator nose-dived to 1.0%, its lowest level since March 2010.
s Comparing price information with health spending data shows
implicit per capita health care utilization growth at 1.1% in
March, somewhat below its 1-year average gain of 1.3%.
s
HEALTH CARE AND ECONOMY-WIDE PRICES
In March 2013, the health care price index (HCPI) was 1.6%
above March 2012, barely above January’s 1.5% level – the lowest HCPI reading since 1.3% recorded in December 1997. The
12-month moving average of 1.9% growth is the lowest since a
1.8% reading in October 1998. The HCPI shows a steady decline
from October 2009 (a 3.3% rate), followed by 2 years oscillating
near 2% price growth, with a sharp recent decline (Exhibit 1).
Economy-wide price inflation, as measured by the gross domestic
product (GDP) deflator, trended up since September 2009, peaked
in July 2011 at 2.5%, and at 1.0% in March 2013 is well below the
HCPI, and at its lowest level since March 2010. Exhibit 5 shows
long-term comparisons.
Exhibit 1. Year-Over-Year Growth Rates in Health Care Price
Index and GDP Deflator
Health Care Prices and Related Stascs: 12-Month Growth Rates
Mar. 2011
Mar. 2012
Feb. 2013
Mar. 2013
Health Care Price Index (HCPI)
2.1%
2.1%
1.7%
1.6%
GDP Deflator (GDPD)
2.1%
1.9%
1.1%
1.0%
HCPI - GDPD*
0.0%
0.1%
0.5%
0.6%
Personal health care spending1
4.8%
4.6%
3.5%
3.4%
Health care utilization
2.7%
2.5%
1.9%
1.8%
CPI-Medical
2.7%
3.5%
3.1%
3.1%
CPI-All items
2.7%
2.7%
2.0%
1.5%
Addendum
*Numbers may not subtract due to rounding
Source: Altarum analysis of U.S. Bureau of Labor Statistics (BLS) data. Health Care price index is
a composite price index designed to measure overall price changes for personal health care
spending, and is patterned after the price index developed by the Centers for Medicare &
Medicaid Services (CMS). Details are provided on page 4.
Since the start of the recession in December 2007, health care prices
have increased by 12.5%, while prices in the economy as a whole (again
using the GDP deflator) have increased by 8.2% (Exhibit 2). Low
economy-wide price growth is clearly exerting downward pressure on
health care price growth, with the “Finished Goods” PPI growth falling
to 1.1% from 1.7% in February, the total CPI falling to 1.5% growth
from 2.0% in February, and the medical CPI equaling its February
level of 3.1% in March – a steady fall from its 4.1% growth rate back
in September 2012.
Exhibit 2. Health Care Price Index and GDP Deflator,
Cumulative Percentage Change Since December 2007
14%
12%
10%
3.5%
8%
3.0%
2.5%
6%
2.0%
4%
1.5%
2%
1.0%
0%
Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec
2007 2008 2008 2008 2009 2009 2009 2010 2010 2010 2011 2011 2011 2012 2012 2012
0.5%
0.0%
Sep
2009
Dec
2009
Mar
2010
Jun
2010
Sep
2010
Dec
2010
Mar
2011
Jun
2011
Sep
2011
Year-Over-Year Percent Change in Health Care
Dec
2011
Mar
2012
Jun
2012
Sep
2012
GDP Deflator Change
Source: Altarum analysis of monthly BLS data
Compares monthly prices to the same month from the previous year
ALTARUM INSTITUTE Price Brief #13-05: March 2013 Data
Dec
2012
Mar
2013
HCPI Growth
GDP Deflator Growth
Source: Altarum analysis of monthly BLS price data and monthly GDP deflator
data published by Macroeconomic Advisers, LLC
Note: Shading indicates recession period
© 2013 Altarum Institute. All rights reserved.
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SYSTEMS RESEARCH FOR BETTER HEALTH
www.altarum.org
HEALTH CARE PRICES BY CATEGORY
PRICES, SPENDING, AND UTILIZATION
Comparing March 2013 to March 2012, the category with the
most rapid price growth is dental care at 3.7%. Prescription drug
price growth had been the highest until its recent steep decline to
0.7% (its lowest reading since 0.7% in June 2007), and 4.0% as
recently as August 2012. Hospital price growth ticked-up to 2.7%
from 2.6% in February, while physician price growth plummeted
to 0.1% from 0.8% in February – its lowest reading since December 2002. Hospital price growth plays a dominant role in the
HCPI per its spending weight, but was again offset in March, e.g.,
by a reading of 0.7% for nursing home care price growth and a fall
for Durable Medical Equipment (DME) from 0.6% in February
to 0.4% in March, in addition to the aforementioned drug and
physician prices. Annual inflation rate comparisons – 2012 to 2013
vs. 2011 to 2012 – highlight the sharp slowdown in price growth
for physicians, nursing homes, and prescription drugs (Exhibit 3
with additional detail in Exhibit 4). Price “momentum,” which
highlights 3 recent months of data (and may be a leading indicator), rose strongly for two categories (other professional and dental
care), but fell, was steady, or rose modestly for the other eight
components. We could, accordingly, see an even lower reading for
the HCPI in April.
We have data on price growth by payer for hospitals. Medicare and
Medicaid prices grow more slowly than “other,” which includes
private payment. In March, hospital prices for Medicare and Medicaid patients grew at 2.0% (unchanged) and -0.8% (down from
-0.6%), respectively, and for other patients, rose further to 4.8%
from a high 4.4% in February (data not shown). The growing
private/public differential may be signaling some cost-shifting.1
Trends in health care utilization (and intensity) can be computed
from the price data combined with Altarum monthly health spending
estimates.2
s Exhibit 6 displays year-over-year growth rates in health care spending broken out by price and utilization. The downward trend in
health spending growth beginning in 2002 is largely attributable to
declining utilization growth rather than price effects. The readings
for March 2013 are 3.4% spending growth, and 1.8% utilization
growth, with utilization showing recent dominance over price.
s Exhibit 7 shows per capita utilization growth and highlights the
decline between 2002 and 2010. Per capita utilization rebounded
sharply early in 2011, fell back and then oscillated in 2012. It rose
at a rate of 1.1% in March, year-over-year, and is averaging 1.3%
growth over the past year.3 On a 12-month average basis, utilization
for hospitals has risen by 2.2% and home health is up 3.7%. Physician, prescription drugs, nursing home and dental show utilization
growth at or below 0.4%, i.e., flat or falling.4
Exhibit 3. Year-Over-Year Price Growth for Selected Health
Categories
Moderate growth in health spending implies low per capita utilization
growth by spending component, with the March 2013 reading 1.1%
higher than March 2012, and a 12-month average growth of 1.3%.
Rather than the expected utilization pick-up, recent data show flat or
falling utilization.
Hospitals
Physician services
DISCUSSION
Health care price inflation in March 2013, at 1.6% year-over-year,
was one tenth below February’s reading, and the 2nd lowest level since
1.3% measured in December 1997. The 12-month moving average
at 1.9% in March 2013 is the lowest since 1.8% recorded in October
1998.
The HCPI fell despite higher hospital price growth due to dramatically
lower price growth for physicians (at 0.1%, the lowest since December
2002), and very low readings for nursing home care, prescription drugs
(at 0.7%, the lowest reading since June 2007) and DME.
March was the 46th month of economic expansion, but health care
price pressures are nowhere to be found – a trend we have been reporting for over a year. With this month’s exceedingly low GDP deflator
(1.0% year-over-year), there will be additional economy-wide downward pressure on health care prices. And, we may finally be seeing a
slowdown in health care hiring.5
Prescripon drugs
Nursing home care
Dental care
Home health
0.0%
0.5%
1.0%
1.5%
March 2013
2.0%
2.5%
3.0%
March 2012
3.5%
4.0%
4.5%
Follow us on Twitter: @ALTARUM_CSHS
Source: Altarum analysis of monthly BLS data
However see: White, C. Contrary to cost-shift theory, lower Medicare hospital payment rates for inpatient care lead to lower private payment rates. Health Affairs 32, No. 5
(2013): 935-943.
2
Altarum Institute Spending Brief #13-05: March 2013 Data. Please note: The Spending Brief covers all spending; this Price Brief covers only personal health care.
3
Harman M, et al. National Health Spending in 2011: Overall growth remains low, but some payers and services show signs of acceleration. Health Affairs 32, No. 1 (2013):
87-99. The article includes a discussion of “non-price” spending factors for the years 2008–2011.
4
Separate data suggest higher recent utilization, especially for drugs. Santangelo, G. (2013). March Rx Growth of 3.4% Indicates Continued Healthy Rx Utilization. Credit
Suisse Equity Research, Monthly Drug Tracker, April 18. https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x507241&serialid=0eeLS%2fPw7i
H78Fxugke%2faWnzHPnR0r3kLdYY1x96jbc%3d. But also note that Q1 2013 company reports, e.g., Cigna, Aetna, HMA, HCA and Tenet, are showing weak utilization.
5
Altarum Institute Labor Brief #13-05: April 2013 Data.
1
ALTARUM INSTITUTE Price Brief #13-05: March 2013 Data
2
SYSTEMS RESEARCH FOR BETTER HEALTH
www.altarum.org
PRICE GROWTH BY DETAILED CATEGORIES
Exhibit 4. Annualized Percentage Change in Prices for the Major Components of National Health Expenditures
Ending March
2011
Ending March
2012
Ending March
2013
2.1%
2.1%
1.6%
Hospital care
1.9%
2.2%
2.7%
Physician and clinical services
1.6%
1.5%
0.1%
Prescription drugs
4.0%
4.2%
0.7%
Nursing home care
2.7%
1.4%
0.7%
Dental services
2.7%
2.2%
3.7%
Home health care
0.2%
0.5%
0.6%
Other professional services
1.3%
1.1%
1.6%
Other personal health care
3.5%
2.1%
2.7%
Other non-durable medical products
0.9%
0.5%
0.8%
Durable medical equipment
-0.4%
0.3%
0.4%
Health care price index
Source: Altarum analysis of monthly BLS data
Notes: Compares monthly prices to the same month from the previous year
TIME SERIES TRACKER
Exhibit 5. Year-Over-Year Percentage Change in Health Prices Compared to the GDP Deflator
7%
6%
5%
4%
3%
2%
1%
0%
1990
1995
2000
Health Care Change
2005
2010
GDP Deflator Change
Source: Altarum analysis of monthly BLS price data and Macroeconomic Advisers GDP data
Note: Lightly shaded bars denote recession periods
Altarum Institute is a 501(c)(3) nonprofit health care research and consulting organization. Altarum integrates independent research and client-centered
consulting to deliver comprehensive, system-based solutions that improve health and health care.
The Center for Sustainable Health Spending (CSHS) was launched in 2011 to lead Altarum Institute’s research on investigating the cost growth trends
and key drivers of U.S. health spending and to formulate policy strategies to help bend the cost growth curve.
The Health Sector Economic IndicatorsSM reports are a monthly publication of Altarum’s CSHS and provide an analysis of health spending, employment, and prices. For more information, contact Charles Roehrig, PhD at 734-302-4600 or [email protected]. Paul Hughes-Cromwick
(principal author), George Miller, PhD, and Ani Turner contributed to this brief. Media Contact: Jeff Moore, 571-733-5702, [email protected].
For more information, please visit www.altarum.org/cshs.
ALTARUM INSTITUTE Price Brief #13-05: March 2013 Data
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SYSTEMS RESEARCH FOR BETTER HEALTH
www.altarum.org
Exhibit 6. Personal Health Care Spending Growth by Price and Utilization Components
14%
12%
10%
8%
6%
4%
2%
0%
1990
1995
2000
Price Component
2005
Ulizaon Component
2010
Health Care Spending
Source: Altarum calculations from Health Sector Economic Indicators data
Note: Lightly shaded bars denote recession periods
Exhibit 7: Year-Over-Year Change in Per Capita Personal Health Care Utilization
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
1990
1995
2000
2005
2010
Source: Altarum calculations from Health Sector Economic Indicators data
Note: Lightly shaded bars denote recession periods
Methods. Altarum estimates for the monthly HCPI, a price index for personal health care spending within National Health Expenditures, are essentially monthly versions of the annual index developed by the CMS National Health Statistics Group (NHSG). The advantages of this measure over the medical care component of the consumer price index are well documented. Information on the CMS index
is presented in: U.S. Department of Health and Human Services, National Health Expenditures Accounts: Definitions, Sources, and Methods,
2011, Washington, DC: Centers for Medicare & Medicaid Services, 2012. Retrieved from http://www.cms.gov/NationalHealthExpendData/downloads/dsm-11.pdf. The HCPI is calculated using BLS data on Producer Price Indices for hospital, physician, nursing home,
and home health components, and Consumer Price Indices for prescription drugs, and other remaining items. Following NHSG, we use
the GDP deflator rather than the Consumer Price Index as our measure of economy-wide inflation. While this brief focuses on prices, it
also incorporates data from our spending brief and shows the power of looking at prices and spending together. In particular, it reveals the
striking role of utilization in health spending growth trends.
ALTARUM INSTITUTE Price Brief # 13-05: March 2013 Data
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