Policy & Regulation News

Health Spending and Job Creation Continues Growth

By Ryan Mcaskill

- With more Americans getting insured, health care spending and industry job creation is growing to meet the demand.

According to the numbers from the Bureau of Economic Analysis (BEA), the health care sector added 22,600 jobs in September. This continues the above average trend that has seen in recent months and increases the six-month average job gain to 26,000. This is 50 percent higher than the 17,500 average that was experienced in the 12 month period that ended in March 2014.

A strong September comes on the heels of a better August that had a job opening rate of 4.3 percent in health care and social assistance, which is the highest since before the recession. Numbers for September will be available later this month.

“Two months ago, we were seeing no acceleration in health care employment,” Charles Roehrig, director of Altarum’s Center for Sustainable Health Spending, wrote in a recent column. “However, with the upward revision to July and strong August and September growth, the picture has transformed into a significant jump in the second quarter that has continued through the third quarter. We are looking to see if this growth has been concentrated in states that embraced expanded coverage under the Affordable Care Act.”

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  • Improved hiring goes hand-in-hand with increased health spending. When compared to August 2013, August 2014 experienced a spending increase of 4.9 percent and the second-quarter growth came in at 5.1 percent. These numbers are outpacing the 3.6 percent growth that was estimated in 2013. The biggest factor pushing this increase is spending on prescription drugs.

    In August 2014, health spending accounted for 17.4 percent of the gross domestic product.

    With strong numbers so far in 2014, the question becomes, how will the remainder of the year fair? As always, there is uncertainty, but a positive trend seems likely. The Center of Medicare & Medicaid Services projects 9 million newly insured adults by the end of the fiscal year. That helps push health spending toward a rate of 5 percent.

    According to Roehrig, there are some areas of accelerated health spending that seem inevitable. Hospital financial reports show the expected effects of expanded coverage which include less uncompensated care, higher revenues and higher patient volumes.

    Despite this, overall health care services spending may be flattening out as no acceleration was experienced in the second quarter of 2014. This is headlines by lower physician services, though it is important to note that prescription drugs – which have been very positive – was excluded from this data. Even with an above average final two quarters of 5.5 percent, the increase would not exceed 5 percent.

    “Although 2014 may be yet another year in which health spending grows more slowly than expected, the anemic economic recovery suggests that near-term pressures to control health spending will remain strong,” Roehrig wrote.