Growth of healthcare prices finally dropped below inflation—and that trend may be here to stay

[Greenbeard]

Still in uncharted territory.

Fierce Healthcare hones in on Altarum's latest monthly price brief, which finds that heath care prices are still growing slower than inflation--a trend that has stretched for over a year now. As Altarum notes in the brief, "This is likely the longest stretch of such behavior in the roughly 50-year history of this data."

Altarum: Growth of healthcare prices finally dropped below inflation—and that trend may be here to stay

Healthcare prices are growing at a rate that’s slower than the overall inflation rate, and there are signs that this trend may be the new normal.
In series of briefs on healthcare spending, employment and price growth, Altarum said it found that the Health Care Price Index (HCPI) increased by 1.5% last month compared to an inflation rate of about 2% for the entire economy.

And this is no statistical blip.

Instead, it marks the 16th month in a row that inflation in the economy as whole has outpaced inflation in healthcare, indicating that the reversal of long-time trends could be here to stay. For hospitals, that means it’s become increasingly necessary to take a good, hard look at cost structures, Paul Hughes-Cromwick, co-director of sustainable health spending strategies at Altarum and the report’s author, told FierceHealthcare.

“For years now, hospital systems—especially national systems—have devoted themselves to being able to provide care at either Medicare rates or not much above that,” Hughes-Cromwick said, “and the systems that are failing are the ones that haven’t been able to reduce their cost structure or clinical integration enough to do so.”

The trend is also a signal that value-based care is starting to gain an effective foothold in the industry, which has been sluggish to adopt these new models, he said.

Focusing on high-value care remains a struggle, but the signs are positive, Hughes-Cromwick said. And that’s in spite of political efforts to undermine or fully eliminate the Affordable Care Act, which put a spotlight on value-based care in addition to the insurance coverage provisions.

“Some of the main goals and thrust of the ACA are coming to play and putting pressure on prices, putting pressure on spending,” he said. “It’s a battle, but we’re trying to get low-value care out of the equation.”

 

[OrphanSlug]

This seems to be in dispute, and I suspect it is going to come down to how data is picked to suggest how healthcare costs are doing in relation to inflation.

What I find is based on area included (or excluded) as well as healthcare insurance reporting we seem to be all over the place.

My take on this is the *politics* of healthcare costs in relation to healthcare means fudging the numbers to a needed outcome. But when looking at what healthcare costs are in relation to GDP we are still very much in trouble.

References:
https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html
https://www.modernhealthcare.com/article/20181025/NEWS/181029946

 

[Greenbeard]

Altarum essentially uses what CMS uses: a health care price index that looks at all prices paid for health care across all payers, public and private, and programs economy-wide. (Similarly both use the GDP deflator as the comparison point for the general price level economy-wide).

HCCI's work only looks at prices paid by employer-sponsored plans serviced by the four payers that feed HCCI claims data: Aetna, Humana, Kaiser Permanente, and United. Their data is interesting and important, particularly for looking at inter and intra-market price variation, but it's not quite a bird's-eye view of all prices being paid for health care in the U.S. Similarly, PwC's medical cost trends work is focused exclusively on employer-sponsored insurance and includes utilization pressures in addition to price growth (e.g., one of their inflators is additional touchpoints that might encourage employees to consume more care, and one of their deflators is a lower intensity flu season than last year).

It all depends on what people want to talk about at any given time. The OP is about taking the broadest possible view of what health care prices are doing economy-wide.