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Health Care Prices Up Less Than 2% Third Straight Month

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Something has put the brakes on the price of American health care.

Analysis from the Center for Studying Health Spending at the Ann Arbor-based Altarum Institute indicates that health care prices in March were 1.9 percent higher than in March 2010 — the third consecutive month of less than 2 percent growth.

“For the first time since 1997-98, health care price inflation has dropped below 2 percent for three consecutive months,” said the director of the center, Charles Roehrig. “This bodes well for continued low growth in health spending as we move into the second quarter of 2011.”

Altarum’s latest “Health Sector Economic Indicators” report shows that prices for hospitals grew by 1.4 percent in March, while physician prices increased by 1.6 percent. These two sectors were large enough to offset the 4 percent growth in prices for prescription drugs and hold overall growth below 2 percent.

The report shows that health care utilization has been more important than prices in determining the rate of growth in national health spending.

“In our March 2011 spending brief, we noted a continuation of historically low rates of growth in health spending,” said Altarum’s Roehrig. “Over the past 10 years or so, the rate of increase in health care utilization has slowed considerably and been the main contributor to slower spending growth. However, over the past few months, slower price growth has offset a rebound in utilization to keep spending growth at low levels. We are particularly interested in understanding the determinants of the utilization trends.”

Altarum’s analysis is based on U.S. Bureau of Labor Statistics price data, and its own monthly composite health care price index, which is patterned after the price index developed by the Centers for Medicare & Medicaid Services. To see the April and previous “Health Sector Economic Indicators” reports, visit www.altarum.org/healthindicators.

More at www.altarum.org

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