Growth in Health Prices Slowest Since 1997

By Joyce Frieden, News Editor, MedPage Today

Published: March 14, 2013

Year-over-year healthcare price inflation was 1.5% in January, the lowest rate since December 1997, according to a report from the Altarum Institute.

"The Health Care Price Index was driven lower by declines in hospital, home health, nursing home, and prescription drug price growth, and mostly stable rates for the other categories," the Ann Arbor, Mich.-based research and consulting firm noted in its report, released Wednesday.

For instance, "The year-over-year prescription drug price rate of 1.6% for January is the lowest reading since 1.4% in January 2009. Physician price growth ticked down to 0.6% (from 0.7% in December), the lowest reading since 0.6% in September 2008."

In other categories, the year-over-year hospital price growth rate – which the authors called a "key health price index driver" – was 2.0%, down from 2.2% in December, the report noted.

A drop in utilization of healthcare services is one of the prime movers behind the slow price growth, according to the report. "Moderate growth in health spending implies low per-capita utilization growth by spending component, with the January 2013 reading 1.4% higher than January 2012, and a 12-month average growth of 1.4%."

The slow increase in healthcare prices was reflected in the larger economy as well, the authors wrote. "Economy-wide price indices exhibited lower or stable growth: the Consumer Price Index (CPI) fell to 1.6% year-over-year (from 1.7% in December), and the "Finished Goods" Producer Price Index ticked up to 1.4% (from 1.3% in December)."

The brief noted that although this is the 44th month of economic expansion, "healthcare price pressures are nowhere to be found. Indeed, lower or stable aggregate inflation measures are likely exerting downward pressure on the health price index, rather than the expected opposite, whereby healthcare prices would be adding to general inflation."

"Separate analysis indicates a real healthcare price break beginning in October 2010," the report continued. "This could be an early indication of a structural change caused by lower price growth targets from public payers and aggressive measures that providers are taking to become more efficient. It warrants future scrutiny to determine its persistence."

The report covers only prices for personal healthcare and not for other health expenditures, the authors noted.Sign Up

Joyce Frieden began her career in medical journalism 26 years ago at Harcourt Brace Jovanovich, working as a news editor for Physician’s Management, Modern Medicine, Hospital Formulary, and several other medical magazines. Since then, her byline has appeared in Business & Health magazine, Internal Medicine News, Family Practice News, Pediatric News, Clinical Psychiatry News, Skin and Allergy News and ObGyn News. Her freelance clients have included Physician’s Weekly, UPI, WebMD, Reuters Health, Drug Topics, the Washington Post, and Washingtonian magazine. She is the recipient of a Jesse H. Neal award presented for editorial excellence by American Business Media, and is co-coordinator of the Washington chapter of the Association of Health Care Journalists.

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