Prescription Drugs, Home Care Drove Health Spending in 2023

With respective increases of 10.8% and 10.7% in 2023, health care spending on prescription drugs and home health care rose the fastest out of seven health care categories analyzed in a recent Altarum report.

Total national health care expenditures grew by 6.2% last year, while gross domestic product (GDP) increased by 6.3% year over year. In December 2023, health care spending accounted for 17.2% of GDP and has remained below 17.5% since January 2022. About 84% of health spending was attributed to personal health care, half of which was spent on hospital care and physician and clinical services.

The analysis showed that personal health care spending growth since December 2022 was driven largely by an increase in utilization: Of the 7.2% growth in personal health care expenditures, 2.9 percentage points can be attributed to price growth, while the remaining 4.4 percentage-point increase was associated with utilization (discrepancy due to rounding).

The overall Health Care Price Index increased by 2.8% year over year in January 2024, according to Altarum, a nonprofit organization that produced the research with a grant from the Robert Wood Johnson Foundation. Among the major health care categories, prices for nursing home care continued to grow the fastest — by 4.9% — in the first month of 2024, followed by dental care (4.8%). Prices for physician and clinical services increased from 0.2% in January 2023 to 1.3% in January 2024, which is slower than overall health care inflation and the fastest rate seen for this category since 2022.

Overall health care utilization growth decreased slightly in December 2023, at 4.3% growth year over year. Prescription drugs comprised the fastest growing utilization component — seeing 9.5% year-over-year growth — which could be due to “a greater number of new drug approvals in 2023, increased use of new obesity and diabetes medications, and impacts of reduced co-pays mandated in the Inflation Reduction Act,” Altarum reported.

In 2023, the rate of job openings in the health care and social assistance sectors fell slightly, yet it still was the second-highest rate since Altarum began its data collection in 2001. In January 2024, the health care industry added 70,300 new jobs, above the 12-month average of 58,700. That growth was largely driven by the ambulatory care sector.

Meanwhile, wage growth in the health care industry fell to 2.9% in December 2023, compared to 4.9% in 2022. The highest level of wage growth was reported in nursing and residential care, at 4.0% year over year, followed by ambulatory care settings at 2.9% and hospitals at 2.4%.

This infographic was reprinted from AIS Health’s weekly publication Health Plan Weekly.