Literature DB >> 10175609

Hospital, employment, and price indicators for the health care industry: fourth quarter 1996 and annual data for 1988-96.

A L Sensenig1, S K Heffler, C S Donham.   

Abstract

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Year:  1997        PMID： 10175609      PMCID： PMC4194473     

Source DB:  PubMed          Journal:  Health Care Financ Rev        ISSN： 0195-8631


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Inpatient hospital use declined in 1996. This was reflected in the number of admissions and in the number of inpatient hospital days. Total patient revenues, the sum of inpatient and outpatient revenues, grew 3.6 percent in 1996, one of the smallest annual increases ever. Assets held by the Medicare Hospital Insurance (HI) Trust Fund fell 4.1 percent from the end of 1995 to the end of 1996, the second consecutive annual decline. Based on preliminary estimates prepared using health care indicator data, national health care expenditures (NHE) will account for approximately 13.7 percent of the gross domestic product (GDP) in 1996. Medical care price growth decelerated in 1996, the result of slower price growth across health care sectors and payers; economy-wide prices accelerated slightly in 1996, continuing the convergence of medical care and overall price growth. In the fourth quarter of 1996, the consumer price index (CPI) for medical care and the CPI for all items less medical care grew at the same rate for the first time since the second quarter of 1981.

Introduction

This article presents statistics on health care use, prices, expenses, employment, and work hours, as well as on national economic activity. These statistics provide an early indication of changes occurring in the health care sector and within the general economy. We rely on indicators such as these to anticipate and predict changes in health care sector expenditures for the most recent year. Other indicators help to identify specific reasons (e.g., increases in price inflation or declines in use) for health care expenditure change. The first nine of the accompanying tables report selected quarterly statistics and the calendar year aggregations of quarterly information for the past 9 years. Unless specifically noted, changes in quarterly statistics are shown from the same period one year earlier. For quarterly information, this calculation permits analysis of data to focus on the direction and magnitude of changes, without interference introduced by seasonal fluctuations. The last four tables in the report show base weights, annual index levels, and annual percent changes in the Input Price Indexes maintained by HCFA. The annual percent changes and the four-quarter moving average percent changes for input prices are calculated using the same procedure, namely averaging the four quarters ending with the fourth calendar quarter of the current year and dividing by the average of the four calendar quarters of the preceding year.

Community Hospital Statistics

Statistics on community hospital operations from the American Hospital Association (AHA) show that community hospitals remained under pressure in 1996 as hospital use continued to decline and hospital revenues continued to grow very slowly. The AHA statistics presented in Table 1 and Table 2 show that in 1996 hospitals continued to adapt to downward pressures on the number of admissions and continuing declines in the average adult length of stay. The number of outpatient visits continued to increase at a markedly faster rate than the number of inpatient admissions. These changes have resulted in financial pressures on hospitals as inpatient revenues grew just 1.2 percent for all of 1996.
Table 1

Selected Community Hospital Statistics: 1988-96

ItemCalendar Year1994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
198819891990199119921993199419951996
Use
All Ages
 Admissions in Thousands33,49633,17633,01732,67032,41132,65232,93833,38933,2688,3688,1808,1548,2368,6348,2818,2138,2608,5118,2678,1598,331
  Admissions per 1,000 Population1132129127125122122122122121124121121122127122120121124120119121
 Inpatient Days in Thousands222,313220,361216,836211,475206,440202,078196,117190,377183,49551,70948,64847,65748,10250,37747,29646,23946,46748,05145,53244,34945,563
 Adult Length of Stay in Days6.66.66.66.56.46.26.05.75.56.25.95.85.85.85.75.65.65.65.55.45.5
65 Years of Age or Over
 Admissions in Thousands11,06211,19011,37911,65911,86012,20912,45612,82012,8703,2113,0983,0223,1253,3793,1873,0713,1843,3243,2043,0903,252
  Admissions per 1,000 Population1359357357360360366369375373382367357368397374359371387372358376
 Inpatient Days in Thousands97,53198,90499,05699,46898,92097,04294,87791,16486,43125,55123,49322,63123,20324,77822,82321,50722,05622,97221,44520,44821,566
 Adult Length of Stay in Days8.88.88.78.58.37.97.67.16.78.07.67.57.47.37.27.06.96.96.76.66.6
Under 65 Years of Age
 Admissions in Thousands22,43421,98621,63821,01120,55120,44320,48320,56920,3985,1585,0825,1325,1115,2555,0945,1435,0775,1875,0635,0705,078
  Admissions per 1,000 Population11009795918987878685888687868886868587848484
 Inpatient Days in Thousands124,782121,457117,781112,007107,520105,036101,24099,21397,06426,15825,15525,02724,89925,59824,47224,73224,41125,07824,08723,90223,997
 Adult Length of Stay in Days5.65.55.45.35.25.14.94.84.85.15.04.94.94.94.84.84.84.84.84.74.7
Surgical Operations in Thousands21,25221,38321,90421,98322,46322,71023,28623,73924,1655,6645,8645,8405,9186,0285,9655,8325,9155,9486,0876,0286,102
Outpatient Visits in Thousands296,111308,086326,498344,116366,243390,188417,684452,558481,29898,341104,079107,022108,241111,088113,699113,332114,438116,335119,874122,232122,857
Adjusted Patient Days in Thousands2281,336282,995283,985282,887281,525278,938276,209273,638270,02371,24468,77667,71168,36371,22668,14667,07967,10669,23267,39466,24767,087
Beds in Thousands942930921912908902891874854895893888886881877871867862859849844
Adult Occupancy Rate364.564.964.563.562.161.460.359.758.764.259.858.359.063.559.357.758.261.258.356.858.7
Total Hospital Revenues in Millions4$186,810$205,698$228,056$251,657$275,430$295,035$309,354$324,961$338,118$76,480$76,829$77,069$78,976$81,793$81,020$80,307$81,842$84,280$84,396$83,449$85,993
 Total Patient Revenues in Millions177,786195,540216,709239,492262,034280,414293,285307,228318,18372,70272,86873,01874,69777,47676,55775,95677,23879,71079,34978,46180,664
  Inpatient Revenues in Millions140,494152,273165,483179,042192,163203,167208,262213,771216,24252,76751,54351,39352,55954,79753,13352,35853,48355,32253,60952,52654,784
  Outpatient Revenues in Millions37,29243,26751,22660,44969,87077,24885,02393,457101,94119,93521,32521,62522,13822,67923,42423,59923,75524,38725,74025,93425,880
Total Expenses
Total Hospital Expenses in Millions$177,770$195,378$217,113$238,633$260,994$278,880$292,801$308,411$320,789$71,677$72,618$73,468$75,039$76,259$76,751$76,808$78,594$79,361$79,958$79,593$81,877
 Labor in Millions96,415106,019117,828128,704140,112149,733156,826163,842168,79638,42038,82839,40840,17040,52940,76840,85741,68841,87341,93541,92543,063
 Non-Labor in Millions81,35589,35999,286109,929120,882129,147135,975144,569151,99333,25733,79034,05934,86935,73035,98335,95136,90637,48838,02337,66838,814
Inpatient Expense in Millions5$140,475$152,136$165,777$178,392$191,385$202,035$207,897$214,570$217,994$52,023$51,366$51,709$52,800$53,936$53,268$52,945$54,421$55,081$54,020$53,284$55,608
 Amount per Patient Day6326907658449271,0001,0601,1271,1881,0061,0561,0851,0981,0711,1261,1451,1711,1461,1861,2011,220
 Amount per Admission4,1944,5865,0215,4605,9056,1886,3126,4266,5536,2176,2796,3416,4116,2476,4326,4466,5886,4726,5346,5306,675
Outpatient Expense in Millions5$37,296$43,242$51,337$60,241$69,609$76,845$84,903$93,841$102,796$19,654$21,252$21,758$22,239$22,323$23,483$23,863$24,172$24,281$25,937$26,309$26,269
 Amount per Outpatient Visit126140157175190197203207214200204203205201207211211209216215214

Admissions per 1,000 population is calculated using population estimates prepared by the Social Security Administration.

Adjusted patient days is an aggregate figure reflecting the number of days of inpatient care, plus an estimate of the volume of outpatient services, expressed in units equivalent to an inpatient day in terms of level of effort. It is derived by multiplying the number of outpatient visits by the ratio of outpatient revenue per outpatient visit to inpatient revenue per inpatient day, and adding the product to the number of inpatient days.

The adult occupancy rate is calculated by the Office of National Health Statistics. The AHA does not publish this statistic. Adult occupancy rate is the ratio of average daily census to average number of beds maintained during the reporting period.

Total hospital revenue is the sum of total patient revenue and all other operating revenue. Total patient revenue is the sum of inpatient revenue and outpatient revenue.

Inpatient Expense and Outpatient Expense are calculated by the Office of National Health Statistics. These statistics are calculated by applying the ratio of inpatient or outpatient revenue to total patient revenue multiplied by total hospital expenses.

NOTES: Q designates quarter of year. Quarterly data are not seasonally adjusted.

SOURCE: American Hospital Association; Trend Analysis Group: National Hospital Panel Survey Reports. Chicago. Monthly reports for January 1988-December 1996.

Table 2

Percent Change in Selected Community Hospital Statistics: 1988-96

ItemCalendar Year1994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
198819891990199119921993199419951996
Annual Percent ChangePercent Change From the Same Period
Use
All Ages
 Admissions in Thousands-0.4-1.0-0.5-1.1-0.80.70.91.4-0.40.21.20.91.33.21.20.70.3-1.4-0.2-0.70.9
  Admissions per 1,000 Population-1.4-2.0-1.5-2.0-1.8-0.3-0.10.5-1.3-0.70.2-0.10.32.20.3-0.2-0.6-2.3-1.1-1.5-0.1
 Inpatient Days in Thousands-0.5-0.9-1.6-2.5-2.4-2.1-2.9-2.9-3.6-2.9-3.0-2.9-3.0-2.6-2.8-3.0-3.4-4.6-3.7-4.1-1.9
  Adult Length of Stay in Days-0.10.1-1.1-1.4-1.6-2.8-3.8-4.2-3.3-3.1-4.1-3.8-4.3-5.6-4.0-3.7-3.7-3.2-3.6-3.5-2.8
65 Years of Age or Over
 Admissions in Thousands2.01.21.72.51.72.92.02.90.42.31.82.61.35.22.91.61.9-1.60.50.62.2
  Admissions per 1,000 Population0.2-0.6-0.10.90.21.50.81.8-0.61.10.71.50.14.11.70.50.8-2.7-0.5-0.31.2
 Inpatient Days in Thousands1.31.40.20.4-0.6-1.9-2.2-3.9-5.2-1.1-3.2-1.6-3.1-3.0-2.9-5.0-4.9-7.3-6.0-4.9-2.2
  Adult Length of Stay in Days-0.70.2-1.5-2.0-2.2-4.7-4.2-6.6-5.6-3.3-5.0-4.1-4.4-7.8-5.6-6.5-6.7-5.8-6.5-5.5-4.3
Under 65 Years of Age
 Admissions in Thousands-1.6-2.0-1.6-2.9-2.2-0.50.20.4-0.8-1.10.7-0.11.31.90.20.2-0.7-1.3-0.6-1.40.0
  Admissions per 1,000 Population-2.4-2.9-2.5-3.8-3.1-1.5-0.7-0.5-1.7-2.0-0.2-1.00.41.0-0.6-0.7-1.5-2.2-1.5-2.3-0.9
 Inpatient Days in Thousands-1.9-2.7-3.0-4.9-4.0-2.3-3.6-2.0-2.2-4.6-2.8-4.1-2.9-2.1-2.7-1.2-2.0-2.0-1.6-3.4-1.7
  Adult Length of Stay in Days-0.3-0.7-1.5-2.1-1.9-1.8-3.8-2.4-1.3-3.5-3.5-4.0-4.2-4.0-3.0-1.4-1.3-0.7-1.0-2.0-1.7
Surgical Operations in Thousands1.00.62.40.42.21.12.51.91.80.32.52.94.56.41.7-0.1-0.1-1.32.13.43.2
Outpatient Visits in Thousands6.24.06.05.46.46.57.08.36.43.96.67.99.713.09.25.95.74.75.47.97.4
Adjusted Patient Days in Thousands1.30.60.3-0.4-0.5-0.9-1.0-0.9-1.3-1.5-0.8-0.9-0.70.0-0.9-0.9-1.8-2.8-1.1-1.20.0
Beds in Thousands-1.3-1.3-0.9-1.0-0.5-0.7-1.2-1.8-2.4-1.2-1.2-1.4-1.2-1.5-1.8-1.9-2.1-2.1-2.1-2.6-2.6
Adult Occupancy Rate10.30.5-0.4-0.9-1.4-0.7-1.1-0.7-0.9-1.1-1.1-0.9-1.1-0.7-0.6-0.6-0.8-2.3-1.0-0.90.4
Total Hospital Revenues in Millions10.310.110.910.39.47.14.95.04.04.04.94.66.06.95.54.23.63.04.23.95.1
 Total Patient Revenues in Millions10.110.010.810.59.47.04.64.83.63.74.74.35.66.65.14.03.42.93.63.34.4
  Inpatient Revenues in Millions8.18.48.78.27.35.72.52.61.22.22.42.23.23.83.11.91.81.00.90.32.4
  Outpatient Revenues in Millions18.216.018.418.015.610.610.19.99.17.810.79.612.013.89.89.17.37.59.99.98.9
Operating Expenses
Total in Millions10.29.911.19.99.46.95.05.34.04.64.95.05.56.45.74.54.74.14.23.64.2
 Labor in Millions10.110.011.19.28.96.94.74.53.04.54.24.95.45.55.03.73.83.32.92.63.3
 Non-Labor in Millions10.39.811.110.710.06.85.36.35.14.85.65.05.77.46.55.65.84.95.74.85.2
Inpatient Expense in Millions8.28.39.07.67.35.62.93.21.63.12.62.93.13.73.72.43.12.11.40.62.2
 Amount per Patient Day8.89.310.710.39.97.86.06.35.46.25.75.96.36.46.75.56.77.15.34.94.2
 Amount per Admission8.79.39.58.88.14.82.01.82.02.91.42.01.80.52.41.72.83.61.61.31.3
Outpatient Expense18.415.918.717.315.610.410.510.59.58.710.910.311.913.610.59.78.78.810.510.28.7
 Amount per Outpatient Visit11.511.412.011.38.63.63.22.03.04.74.12.22.00.51.13.62.83.94.82.21.2

Change in rate, rather than percent change.

NOTES: Q designates quarter of year. Quarterly data are not seasonally adjusted.

SOURCE: American Hospital Association, Trend Analysis Group: National Hospital Panel Survey Reports. Chicago. Monthly reports for January 1988-December 1996.

Hospital use, particularly in inpatient settings, continued to decline in 1996. Figure 1 shows the change in hospital admissions, outpatient visits, and inpatient days. The overall number of hospital admissions fell 0.4 percent in 1996, after increasing 1.4 percent in 1995 and 0.9 percent in 1994. Hospital admissions have fallen in every year since 1983 except for these two years. The number of inpatient days continued to fall in 1996, and the decline in inpatient days actually accelerated to 3.6 percent The decrease in inpatient days was particularly evident in statistics for the population aged 65 years or older. The number of inpatient days for this age cohort, essentially the Medicare population, registered a 5.6-percent decline in 1996, following a similar decline of 6.6 percent in 1995. The continued decline in the number of inpatient days continued to outstrip the decline in the number of staffed hospital beds, and as a result the hospital occupancy rate continued to fall in 1996 to a new low of 58.7 percent.
Figure 1

Percent Change From the Same Period of Previous Year in Community Hospital Admissions, Outpatient Visits, and Inpatient Hospital Days: 1988-96

The continued slide in hospital inpatient use in 1996 had a marked effect on the growth of hospital revenues for the year. Figure 2 shows the change in total patient, inpatient, and outpatient revenues for 1988-96. The 1996 growth in inpatient revenue was 1.2 percent, one of the lowest levels ever recorded in the AHA statistics.
Figure 2

Percent Change From the Same Period of Previous Year in Total Patient Revenue, Inpatient Revenue, and Outpatient Revenue: 1988-96

Medicare Trust Funds Income and Outlays

Health Care Indicators includes statistics on the income and outlays of the Medicare trust funds in Table 3. Quarterly levels of the outlays and income of the hospital insurance (HI) and supplementary medical insurance (SMI) trust funds fluctuate from quarter to quarter for many reasons. The variability in the quarterly trust fund data may be even greater than the quarterly variability in the other health care indicators discussed in this article (essentially price and use series) because of the effects of the timing of payments into and from the trust funds. The primary sources of variation in the level of outlays are the number of business days in a quarter, the timing of payments usually made the first of a month that are made early when the first day is on a weekend or legal holiday, and seasonal variation in health care use and costs. The sources of variation in income flows generally result from the timing of payments made to the trust funds. The timing of payroll tax withholding; settlements on self-employment taxes; and premium, interest, and general revenue payments to the funds are the primary sources of this variation.
Table 3

Hospital Insurance and Supplementary Medical Insurance Trust Fund Operations: 1991-96

IndicatorCalendar Year1993Q11993Q21993Q31993Q41994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
199119921993199419951996
Total Medicare Outlays
 In Millions of Dollars$121,448$135,845$152,174$164,862$184,203$202,703$36,174$37,870$38,037$40,091$39,133$40,509$42,761$42,459$44,352$46,725$46,559$46,566$47,456$52,009$50,599$52,639
Hospital Insurance Trust Fund72,57085,01594,391104,545117,604132,29522,13423,98223,51724,75825,45825,93726,61826,53328,63830,51329,19929,25431,28834,52632,61533,866
Supplementary Medical Insurance Trust Fund48,87750,83057,78360,31766,59970,40814,04113,88814,52015,33413,67614,57216,14315,92615,71416,21217,36117,31216,16817,48317,98418,773
Hospital Insurance Trust Fund
 Operations: In Millions of Dollars
  Income$88,839$93,836$98,187$109,570$115,027$126,968$20,833$29,581$21,327$26,446$22,047$33,155$24,547$29,821$25,215$35,570$24,241$30,001$26,293$39,365$27,840$33,470
  Outlays72,57085,01594,391104,545117,604132,29522,13423,98223,51724,75825,45825,93726,61826,53328,63830,51329,19929,25431,28834,52632,61533,866
  Difference16,2698,8213,7965,025-2,577-5,327-1,3015,599-2,1901,688-3,4117,219-2,0713,288-3,4235,057-4,958747-4,9954,839-4,775-396
Assets at End of Period1115,202124,022127,818132,844130,267124,940122,722128,320126,131127,818124,40831,626129,555132,844129,420134,477129,520130,267125,272130,111125,336124,940
Supplementary Medical Insurance Trust Fund
 Operations: In Millions of Dollars
  Income$51,224$57,237$57,679$55,608$60,306$85,610$10,635$15,935$14,919$16,189$13,299$14,387$13,491$14,430$16,478$17,189$10,072$16,568$26,596$19,654$19,208$20,152
  Outlays48,87750,83057,78360,31766,59970,40814,04113,88814,52015,33413,67614,57216,14315,92615,71416,21217,36117,31216,16817,48317,98418,773
  Difference2,3466,407-104-4,709-6,29315,202-3,4052,047399856-377-185-2,651-1,496764977-7,288-74510,4282,1711,2241,379
Assets at End of Period117,82824,23524,13119,42213,13028,33220,83022,87723,27624,13123,75523,57020,91919,42220,18621,16313,87413,13023,55825,72926,95328,332
Annual Percent ChangePercent Change From Same Period of Previous Year
Total Medicare Outlays—11.912.08.311.710.012.712.710.012.78.27.012.45.913.315.38.99.77.011.38.713.0
Hospital Insurance Trust Fund—17.111.010.812.512.59.012.49.912.715.08.113.27.212.517.69.710.39.313.211.715.8
Supplementary Medical Insurance Trust Fund—4.013.74.410.45.719.113.210.312.7-2.64.911.23.914.911.37.58.72.97.83.68.4
Hospital Insurance Trust Fund
 Operations
  Income—5.64.611.65.010.43.52.39.94.35.812.115.112.814.47.3-1.20.64.310.714.811.6
  Outlays—17.111.010.812.512.59.012.49.912.715.08.113.27.212.517.69.710.39.313.211.715.8
Assets at End of Period—7.73.13.9-1.9-4.16.74.64.63.11.42.62.73.94.02.20.0-1.9-3.2-3.2-3.2-4.1
Supplementary Medical Insurance Trust Fund
 Operations
  Income—11.70.8-3.68.542.0-16.517.428.5-16.225.0-9.7-9.6-10.923.919.5-25.314.861.414.390.721.6
  Outlays—4.013.74.410.45.719.113.210.312.7-2.64.911.23.914.911.37.58.72.97.83.68.4
Assets at End of Period—35.9-0.4-19.5-32.4115.810.913.925.6-0.414.03.0-10.1-19.5-15.0-10.2-33.7-32.416.721.694.3115.8

As shown in the Monthly Treasury Statement. Excludes undisbursed balance.

NOTES: Q designates quarter of year. Quarterly data are not seasonally adjusted.

SOURCES: Monthly Treasury Statement of Receipts and Outlays of the United States Government. Financial Management Service, U.S. Department of the Treasury. 1997 Annual Reports of the Board of Trustees of the HI and SMI Trust Funds. Office of the Actuary, Health Care Financing Administration.

The growth in total Medicare outlays, the sum of Part A and Part B outlays, decelerated in calendar year 1996. Total Medicare outlays increased 10.0 percent in 1996, compared with an increase of 11.7 percent in 1995. This slowdown was driven by the marked deceleration in Part B outlays. Outlays for Part B increased just 5.7 percent in 1996, after increasing 10.4 percent in 1995. In contrast, outlays for Part A increased 12.5 percent in both 1995 and 1996. The key factor in the deceleration of Part B outlays is the Medicare volume performance standards (MVPS) which were incorporated into the physician fee schedule in 1992. These standards, designed to control growth in Medicare physician and other professional services, imposed a penalty for overshooting 1994 growth targets that took effect in the first quarter of calendar 1996 (Levit et al., 1996). As a result, price increases for services covered by the physician fee schedule, which accounted for most of the Part B outlay growth in 1995, were severely limited in 1996. Although the volume of services—as well as outlays for Part B benefits not covered by the physician fee schedule—affected Part B outlays in 1996, the price constraints imposed by the MVPS acted to slow Part B outlays during the year. Outlays from the Part A (HI) trust fund increased 12.5 percent in 1996, the same rate of growth recorded in 1995. Figure 3 depicts the quarterly changes in the income and outlays of the Part A trust fund, as well as the percent change in the assets held by the fund at the end of each quarter. The Part A trust-fund assets balance fell 4.1 percent in 1996 after declining 1.9 percent in 1995. The most recent estimates, contained in the 1997 Trustees Report, indicate that, given current law and current trends, the Part A trust fund will be depleted in 2001.
Figure 3

Percent Change From the Same Period of Previous Year in Medicare Hospital Insurance (Part A) Trust Fund Income, Outlays, and Assets: 1992-96

Trends in Health Sector Employment and Earnings

Employment in private sector health services establishments increased 3.3 percent in 1996, the fastest rate of increase in health services employment since 1992. During the same period, employment in all private sector establishments increased 2.2 percent. More than 300,000 new jobs were created in private sector health services, accounting for 14 percent of the 2.2 million new jobs generated by all private sector establishments in 1996. As shown in Figure 4, employment growth in private sector health services has outpaced employment growth in the private non-farm business sector as a whole in 8 of the last 10 years.
Figure 4

Percent Change From the Previous Year in Private Non-Farm Sector Employment and Private Health Services Employment: 1987-96

Trends within the health care sector shifted in 1996. Employment growth in private hospitals and physicians' offices was stronger in 1996 than any time in the last 4 years. In 1996, employment in private hospitals grew 1.8 percent and employment in physicians' offices increased 4.1 percent. An acceleration in the employment growth of these two sectors is significant because spending on hospital and physician services combined accounts for 56 percent of total national health spending (Levit et al., 1996). Acceleration in employment growth for both hospitals and physicians' offices may signal an acceleration in spending for these services in 1997. There was also a significant change in the employment growth on home health care services in 1996. Home health care services has been the fastest growing component of health services since statistics were first collected on home health care as a separate industry in 1988. In 1996, home health care employment grew 5.0 percent from the previous year, the slowest annual rate of increase ever recorded for this industry. More importantly, in 1996 employment growth in home health care services slowed dramatically during the year. In the fourth quarter of 1996 home health care services increased only 2.9 percent from the same period one year earlier, compared with increases of 7.3 and 6.2 percent in the first and second quarters respectively.

Medical Sector Prices

The CPI for medical care grew a percentage point more slowly in 1996 than in 1995 whereas economy-wide prices, as measured by both the CPI and the producer price index (PPI), grew slightly faster in 1996 than they had in 1995. This continues the trend since 1990 of medical care price growth converging towards the growth rate of overall prices. The CPI for medical care grew 3.5 percent in 1996, whereas the CPI for all items less medical care grew 2.9 percent in 1996, the narrowest differential since 1981. (Consumer medical care prices grew 4.5 percent in 1995 as compared with 2.7-percent growth in the CPI for all items less medical care.) The convergence is more apparent in the quarterly data, where the CPI for medical care and the CPI for all items less medical care both grew 3.1 percent in the fourth quarter of 1996 from the same quarter in 1995 (Figure 5). This marks the first time since the second quarter of 1981 that these two CPIs grew at the same rate. On a quarterly basis, the CPI for medical care moved downward through 1996 whereas the economy-wide CPI grew faster in each subsequent quarter of 1996. The recent deceleration in medical sector transaction and list prices coincides with a rise in managed care participation. Transaction prices for hospitals and physicians, as measured by the PPI, have decelerated since 1994 whereas list prices for medical care services, as measured by the CPI, has slowed from 9.1-percent growth in 1990 to 3.5 percent in 1996 (Table 9). Since 1990, enrollment in health maintenance organizations (HMOs) has almost doubled from 36.5 million to 67.5 million in 1996 (American Association of Health Plans, 1995). In 1995, the most recent available data, enrollment in both HMOs and preferred provider organizations (PPOs), widely known as managed care enrollment, reached 150 million, accounting for roughly 57 percent of residential population (U.S. Department of Commerce, 1996). With managed care participation reaching these levels, questions arise as to how much more penetration will occur.
Figure 5

Percent Change in Consumer Price Indexes From the Same Period of Previous Year: 1987-96

Table 9

Percent Change in Medical Prices From Same Period a Year Age: 1988-96

IndicatorCalendar Year1994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
198819891990199119921993199419951996
Annual Percent ChangePercent Change From the Same
Consumer Price Indexes, All Urban Consumers1
Medical Care Services26.57.69.38.97.66.55.25.03.75.45.15.05.25.55.25.04.54.13.83.53.2
 Professional Services6.76.46.66.26.15.14.34.43.74.34.24.14.54.74.44.44.03.83.73.53.6
  Physicians' Services7.27.37.26.06.35.64.44.53.64.84.54.24.34.54.54.64.54.23.73.33.2
  Dental Services6.86.26.77.56.75.34.84.94.74.44.54.85.45.74.94.84.34.24.64.95.1
 Hospital and Related Services9.311.510.910.29.18.45.95.04.56.75.85.75.45.35.04.84.64.74.74.64.2
  Hospital Room9.210.310.99.48.88.55.75.03.96.65.65.55.05.35.14.94.84.13.93.83.8
  Other Inpatient Services (1986=100)9.713.110.710.79.17.86.15.04.96.86.35.95.75.55.04.84.55.05.05.04.4
  Outpatient Services (1986=100)8.910.911.210.610.09.35.84.95.16.55.45.75.75.24.94.74.85.05.75.44.4
Medical Care Commodities6.97.88.48.26.43.72.91.92.92.93.02.83.02.51.71.51.82.43.13.22.9
 Prescription Drugs7.98.710.09.97.63.93.41.93.33.04.03.23.42.41.51.92.02.93.63.53.3
 Non-Prescription Drugs and Medical Supplies (1986=100)4.96.05.24.73.93.31.91.81.92.60.92.02.12.82.30.71.21.52.02.31.7
  Internal and Respitory Over-the-Counter Drugs5.56.15.24.53.83.31.50.61.93.01.30.80.91.10.30.50.61.32.11.92.4
  Non-Prescription Medical Equipment and Supplies3.65.85.35.04.13.32.73.91.71.90.14.24.45.86.11.32.51.71.82.80.6
Producer Price Indexes3
Industry Groupings:4
 Health Services (12/94=100)————————2.2————————2.52.42.11.8
  Offices and Clinics of Doctors of medicine (12/93=100)———————3.90.7————4.54.34.02.91.00.70.40.8
   Medicare Treatments (12/93=100)———————4.7-3.7————4.74.74.74.7-3.7-3.7-3.7-3.7
   Non-Medicare Treatments (12/93=100)———————3.61.8————4.54.33.62.11.91.51.62.0
  Hospitals (12/92=100)——————3.63.52.43.83.63.63.54.03.73.13.42.72.72.51.8
   General Medical and Surgical Hospitals (12/92=100)——————3.53.72.43.53.53.53.44.03.83.23.72.92.82.31.5
    Inpatient Treatments (12/92=100)——————3.53.12.33.73.63.53.13.43.22.53.12.82.82.31.4
     Medicare Patients (12/92=100)——————2.02.03.32.32.32.31.31.31.31.34.14.14.14.11.2
     Medicaid Patients (12/92=100)——————4.62.52.24.34.75.04.54.03.41.11.62.12.62.41.7
     All Other Patients (12/92=100)——————4.03.71.84.34.13.83.94.44.23.33.02.32.01.41.4
    Outpatient Treatments (12/92=100)——————4.16.22.63.43.74.44.76.66.36.06.13.32.92.21.9
     Medicare Patients (12/92=100)——————3.14.01.72.32.63.04.64.54.84.02.71.91.31.42.3
     Medicaid Patients (12/92=100)——————1.72.9-0.21.1-0.32.73.13.84.60.62.81.31.20.1-3.4
     All Other Patients (12/92=100)——————4.46.93.03.84.34.84.87.26.76.86.93.73.42.62.4
  Skilled and Intermediate Care Facilities (12/94=100)————————6.1————————6.16.56.25.7
   Public Payors (12/94=100)————————6.5————————6.67.26.55.5
   Private Payors (12/94=100)————————5.9————————5.95.86.06.0
  Medical Laboratories (6/94=100)————————1.3——————5.95.13.71.8-0.60.3
Commodity Groupings:
 Drugs and Pharmaceuticals6.77.96.76.95.34.52.52.41.83.02.62.12.31.92.22.43.12.52.01.90.8
  Ethical (Prescription) Preparations7.99.18.98.46.54.53.22.83.33.93.42.72.81.82.33.04.23.93.63.62.0
  Proprietary (Over-the-Counter) Preparations6.65.33.15.55.03.71.81.8-0.82.21.81.61.62.32.21.21.61.5-1.1-1.8-1.8
 Medical, Surgical, and Personal Aid Devices1.73.43.52.32.73.01.80.71.32.11.62.01.60.50.40.61.22.01.80.80.4
  Personal Aid Equipment1.40.51.92.92.61.76.42.74.24.36.77.47.42.60.73.24.44.36.13.82.6
  Medical Instruments and Equipment (6/82=100)1.74.12.61.52.22.10.51.31.40.80.10.80.61.11.11.61.42.01.60.81.1
  Surgical Appliances and Supplies (6/83=100)1.63.64.73.53.14.13.1-0.61.43.63.13.32.4-0.8-1.0-1.00.62.02.61.1-0.3
  Ophthalmic Goods (12/83=100)1.02.81.00.91.70.90.62.2-1.61.40.50.10.31.42.12.92.30.4-1.8-2.5-2.5
  Dental Equipment and Supplies (6/85=100)2.31.14.11.94.53.82.91.72.52.92.43.03.11.62.20.82.23.22.02.82.2

Unless Otherwise noted base year is 1982-84 = 100

Includes the net cost of private health insurance, not shown separately.

Unless otherwise noted, base year is 1982 = 100. Producer price indexes are classified by industry (price changes received for the industry's output sold outside the industry) and commodity (price changes by similarity of and use or material composition).

Further detail for Producer Price Industry groupings, such as types of physician practices, hospital DRG groupings, etc., are available from the Bureau of Labor Statistics.

NOTES: Q designates quarter of year. Quarterly data are not seasonally adjusted.

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics: CPI Detailed Report. Washington. U.S. Government Printing Office. Monthly reports for January 1988 - December 1996; U.S. Department of Labor, Bureau of Labor Statistics: Producer Price indexes. Washington. U.S. Government Printing Office. Monthly reports for January 1988-December 1996.

The PPI for health services grew less quickly than overall producer prices in 1996. Data on the PPI for health services are not available prior to 1996. The PPI for health services also trended downward on a quarterly basis through 1996, decelerating from 2.5-percent growth in the first quarter of 1996 to 1.8-percent growth in the fourth quarter of 1996 (Table 9). For 1996, the PPI for health services grew at 2.2 percent, which is slower than the 3.1-percent increase in the PPI for finished consumer goods. The PPI for finished consumer goods grew slightly faster in 1996 than it had in 1995 (1.9 percent) and substantially faster than in 1994 (0.2 percent). The slight acceleration in 1996 is consistent with the slight acceleration in the economy-wide CPI explained in the previous section. The quarterly PPI data for finished consumer goods also showed an accelerating trend through 1996. The deceleration in medical care consumer and producer price growth in 1996 was spread across health care sectors and patients, with a few exceptions. As indicated in Figures 6 and 7, most medical sector prices grew more slowly between 1995-96. Growth in hospital inpatient prices and physicians' prices decelerated according to both the CPI and PPI surveys. Whereas the CPI measured a slight acceleration in hospital outpatient list price growth in 1996, the PPI showed hospital outpatient transaction price growth decelerating rapidly in 1996. A direct comparison between growth rates in the CPI and PPI surveys cannot be made because the CPI measures list prices changes for household out-of-pocket expenditures whereas the PPI measures transactions prices from out-of-pocket, Medicare, Medicaid, and other third-party payers. However, the trends in the growth rates of the two surveys can be compared. By patient, nearly all faced slower price growth in 1996 than in 1995. Medicaid and other patients besides Medicare and Medicaid faced decelerating price growth for both inpatient and outpatient treatments in 1996, and Medicare patients faced slower price growth in 1996 for outpatient treatment.
Figure 6

Percent Change for Selected Health Care Consumer Price Indexes: 1995 and 1996

Figure 7

Percent Change for Selected Health Care Producer Price Indexes: 1995 and 1996

The only area where medical prices accelerated slightly in 1996 was for medical commodities. Although the CPI for medical equipment showed decelerating price growth in 1996, the PPI showed a slight acceleration for similar equipment. Both the CPI and PPI showed faster price growth in 1996 for prescription drugs. Part of the acceleration in the CPI for prescription drugs can be explained by a methodological revision in which previously excluded generic drug substitution patterns were incorporated in the CPI for the first quarter of 1995 (see the Health Care Indicators article in the Spring 1996 issue of the Health Care Financing Review). This resulted in a one-time decrease in over-the-year drug prices in 1995 and a one-time offsetting increase in over-the-year prescription drug prices in 1996. However, the PPI data for ethical (prescription) preparation prices also indicates an acceleration in 1996. Increased growth in drug prices is consistent with recent evidence that drug prices have begun to accelerate after lower increases in recent years (Tanouye, 1997). Despite an acceleration in commodity prices and prices faced by Medicare patients for hospital inpatient treatments, medical care price growth decelerated through 1996 across most health care sectors and patients. The recent downward trends in health care price growth through 1996 leads to questions about price growth for 1997. Some analysts have recently suggested that health care prices will begin to accelerate in 1997 (Auerbach, 1997). In 1996, the gap between the growth rates in the CPI for medical care and the CPI for all items less medical care was smaller than at any point since 1981. According to the CPI and PPI surveys, price growth for medical care and health services, respectively, was slower than economy-wide price growth in the fourth quarter of 1996. The fourth quarter of 1996 marks the fourth instance medical care consumer prices have grown as fast as or slower than economy-wide prices, the other three periods being 1970:1 to 1970:2, 1972:2 to 1974:4, and 1978:3 to 1981:2. The recent trend indicates that medical care consumer price and health services producer price growth are not following the slightly upward trend in economy-wide price growth. Past history has shown that medical prices tend to grow more slowly than overall prices for short periods before returning to faster growth rates. Given the experience of 1996, questions exist about medical price growth in 1997. There are many factors which will determine how medical prices will grow in 1997. Some of these factors include how much additional managed care penetration can occur in 1997 given the 57 percent enrolled in 1995, the reduced amount of public (e.g., Medicare, Medicaid) outlays planned for 1997, and the increasing wage and overall price pressures facing health care providers. The last factor is interesting because these upward wage and small upward price pressures were not enough to slow the deceleration in medical prices in 1996. As mentioned earlier, prescription drug price growth accelerated in 1996 (Table 9) as well as some outpatient and medical equipment prices. Also, wages for both the non-health and health care sectors grew faster in 1996. As indicated in Table 5, the AHE for the non-farm private sector grew 3.3 percent in 1996 versus 2.8 percent in 1995, whereas the AHE for health services grew 3.1 percent in 1996 versus 2.9 percent in 1995. Within health services, average hourly earnings in offices and clinics of physicians, offices and clinics of dentists, and home health care services accelerated in 1996, whereas average hourly earnings in nursing homes and private hospitals decelerated slightly.
Table 5

Percent Change in Employment, Hours, and Earnings in Private Sector Health Service Establishments, by Selected Type of Establishment: 1986-96

Type of EstablishmentCalendar Year1994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
198819891990199119921993199419951996
Annual Percent ChangePercent Change From the Same Period of Previous Year
Total Employment (in Thousands)
Non-Farm Private Sector3.42.61.1-1.40.12.13.43.02.22.93.43.63.83.93.22.72.31.92.22.42.4
 Health Services4.65.04.74.73.83.12.72.93.32.82.82.72.62.72.72.93.43.53.63.33.0
  Offices and Clinics of Physicians5.35.75.55.04.22.92.63.94.12.02.22.73.43.84.03.84.13.94.34.33.9
  Offices and Clinics of Dentists3.03.42.62.92.52.93.14.14.73.13.33.13.13.33.64.54.85.24.84.44.5
  Nursing Homes2.23.44.45.52.73.44.02.72.94.74.44.03.02.82.52.63.02.83.12.92.6
  Private Hospitals4.84.43.23.02.60.8-0.40.61.8-0.4-0.5-0.5-0.3-0.10.30.71.31.81.91.71.7
  Home Health Care ServicesN/A12.819.218.515.517.919.311.95.021.020.718.916.915.312.011.19.77.36.23.82.9
Non-Supervisory Employment (in Thousands)
Non-Farm Private Sector3.42.71.0-1.60.42.53.83.22.33.23.84.04.24.23.52.92.42.02.32.52.5
 Health Services4.45.24.74.73.73.02.52.93.42.62.62.52.52.62.63.03.53.63.63.33.0
  Offices and Clinics of Physicians4.85.95.54.64.02.42.54.04.41.91.92.63.43.64.03.94.34.24.64.74.2
  Offices and Clinics of Dentists2.33.32.83.12.12.83.04.05.23.13.32.82.93.13.34.55.05.65.64.94.9
  Nursing Homes2.13.64.35.42.83.33.92.72.74.54.23.93.02.82.52.63.02.72.92.72.4
  Private Hospitals5.04.53.33.22.70.6-0.70.61.9-0.7-0.8-0.8-0.5-0.20.30.81.42.02.01.81.8
  Home Health Care ServicesN/A13.319.418.615.617.919.111.95.021.320.718.416.615.011.911.39.77.36.13.72.9
Average Weekly Hours
Non-Farm Private Sector-0.2-0.3-0.3-0.60.20.30.5-0.6-0.10.70.60.30.60.0-1.0-0.5-0.8-1.10.20.10.3
 Health Services0.20.10.30.00.70.10.1-0.2-0.30.10.0-0.10.20.1-0.2-0.1-0.4-0.8-0.5-0.20.2
  Offices and Clinics of Physicians1.51.0-0.40.40.80.20.50.21.00.70.40.10.90.20.10.40.10.41.01.11.4
  Offices and Clinics of Dentists0.6-0.1-0.2-0.40.2-0.3-0.5-0.60.60.1-0.7-0.8-0.5-0.5-0.9-0.8-0.2-0.60.61.30.9
  Nursing Homes0.00.90.90.10.5-0.30.30.5-0.40.20.0-0.21.00.60.30.70.4-0.30.0-0.4-0.8
  Private Hospitals-0.50.00.70.00.60.50.2-0.3-0.50.50.20.1-0.1-0.1-0.1-0.6-0.5-0.9-0.9-0.50.1
  Home Health Care ServicesN/A-4.1-0.43.24.81.41.71.2-1.81.71.61.12.42.61.91.7-1.4-3.4-3.2-1.20.7
Average Hourly Earnings
Nonfarm Private Sector3.44.03.73.12.42.52.72.83.32.62.52.62.82.72.73.03.03.13.43.43.5
 Health Services5.96.75.95.33.93.42.72.93.12.72.62.92.83.02.82.73.03.03.23.23.0
  Offices and Clinics of Physicians5.37.98.15.32.54.23.12.14.63.83.13.22.42.41.71.72.73.44.65.25.2
  Offices and Clinics of Dentists3.96.67.84.73.83.84.63.63.84.75.04.84.13.93.63.43.63.53.34.04.4
  Nursing Homes5.47.46.54.43.94.04.03.12.54.24.14.03.63.73.42.92.62.42.32.42.7
  Private Hospitals6.86.75.26.04.23.32.73.42.82.42.52.93.13.53.33.33.43.13.32.72.0
  Home Health Care ServicesN/A7.510.97.86.64.12.52.32.42.62.72.32.32.52.12.02.62.42.62.72.1
Addenda: Hospital Employment (in Thousands)
 Total3.73.12.42.22.20.6-0.50.31.2-0.3-0.5-0.6-0.5-0.30.00.40.91.31.41.11.1
 Private4.84.43.23.02.60.8-0.40.61.8-0.4-0.5-0.5-0.3-0.10.30.71.31.81.91.71.7
 Federal-3.5-5.51.90.80.5-0.40.0-0.7-2.11.70.6-0.8-1.5-2.2-1.10.8-0.50.2-1.3-4.0-3.1
 State1.7-0.9-3.7-2.20.5-1.2-1.6-2.5-3.5-1.5-1.4-1.9-1.6-1.3-2.6-2.9-3.0-3.3-3.2-3.7-3.9
 Local2.12.12.21.11.81.30.00.81.90.50.0-0.4-0.30.00.61.01.71.71.91.92.1

Excludes hospitals, clinics, and other health-related establishments run by all governments.

NOTES: Data presented here conform to the 1987 Standard Industrial Classification. Quarterly data not seasonally adjusted.

SOURCE: U.S. Department of Labor, Bureau of labor Statistics: Employment and Earnings. Washington. U.S. Government Printing Office. Monthly reports for January 1988-December 1996.

The acceleration in AHE for health services is consistent with the acceleration in wages as measured by the HCFA input price indexes. For the PPS hospital input price index, the home health agency (HHA) input price index, and the Medicare economic index (MEI), wage growth accelerated in 1996. Only the wage proxy for the skilled nursing facility (SNF) input price index (AHE for nursing homes) did not accelerate in 1996. An acceleration in wages is important for overall health sector prices because wages represent between 45-64 percent of a provider's input costs. Although wage growth accelerated for the HCFA input price indexes in 1996, deceleration in prices for benefits, chemicals, rubber and plastics, and paper products somewhat offset this growth. It will be interesting to see if slower price growth in other health care inputs can offset the expected continued wage pressures in 1997.

Using Indicators to Predict Health Care Spending

The 1996 health care indicators, presented in Tables 1-13, can be used to predict the share of GDP allocated to health care spending prior to the availability of more complete health expenditure data. Growth rates for five major components of NHE can be estimated using the growth rates of selected health care indicators. The five major components estimated in this way are hospital care, physician services, dental services, drugs and other nondurable medical products, and nursing home care. During the past decade, these five components on average have accounted for 78.5 percent of all health care spending. An expected range for annual health care spending in 1996 can be determined from preliminary estimates of these five components.
Table 13

Calendar Year Index Levels and Four-Quarter Moving-Average Percent Change in the HCFA Medicare Economic Index with DRI Forecast Assumptions, by Expense Category: 1988-2003

Expense Category1Price/Wage VariableBase Year Weights CY 892198819891990199119921993199419951996Forecast
1997199819992000200120022003
Index Levels
Total—100.00097.8101.3104.2106.8109.0111.5114.0116.2118.9121.9124.9128.2131.5134.7138.2142.0
 Physician Earnings—54.15598.2101.3104.2106.6108.0110.0112.2114.3117.2119.9122.5125.5128.3131.2134.2137.8
  Wages and SalariesAHE—Private345.34298.5101.3103.6105.4106.3107.8109.8112.1115.2117.9120.4123.1125.7128.3130.9134.3
  BenefitsECI—Benefits, Private38.81396.7101.6107.1112.6116.7121.2124.4126.0127.6130.0133.2137.8141.9146.5151.1156.0
 Practice Expenses—45.84597.4101.2104.3107.2110.2113.2116.1118.4120.8124.2127.8131.4135.2138.9142.8147.0
  Non-Physician Compensation—16.29697.7101.2105.0108.4110.2112.6115.2117.3120.1123.1126.0129.1132.2135.4138.9142.5
   Wages and Salaries—13.78698.0101.1104.5107.6109.0111.2113.4115.6118.6121.7124.5127.2130.2133.0136.3139.6
    Professional/TechnicalECI—W/S: Professional/Technical33.79097.7101.2105.0108.2110.5112.6114.8116.6119.3122.7125.4128.3131.3134.1137.3141.1
    ManagersECI—W/S: Administrative./Managerial32.62098.3100.7104.9108.1108.3110.7112.9115.6119.3122.6125.4128.2130.9133.7136.8140.0
    ClericalECI—W/S: Clerical5.07497.8101.2104.2107.0108.9111.5113.8116.2119.0121.9124.9127.5130.7133.7136.9140.0
    CraftECI—W/S: Craft30.06998.2100.8103.0105.3106.7108.6110.6112.8115.5118.3120.9123.5126.3128.8131.5134.5
    ServicesECI—W/S: Service Occupations32.23398.7101.2104.2107.1107.8108.9111.1112.5115.7118.7121.1123.9126.5129.2132.6135.8
  Employee BenefitsECI—Benefits, Private White Collar32.51096.2101.6107.4112.8116.5120.5124.7126.7128.6131.1134.5139.2143.5148.3153.2158.3
 Office ExpensesCPI(U)—Housing10.28097.6101.3106.1109.6112.6115.6118.3121.6125.2129.9133.9137.8141.8146.0150.1154.7
 Medical Materials/SuppliesPPI—Drugs/PPI—Surgical/CPI—Medical Supplies5.25195.6102.3108.1114.2118.8123.0126.9130.1131.2134.7138.7143.1148.1153.4159.0165.0
 Professional Liability InsuranceHCFA—Professional Liability Premiums4.78098.299.789.385.690.794.597.796.695.897.199.7102.7105.3107.3109.2111.1
 Medical EquipmentPPI—Medical Instruments/Equipment2.34897.5101.0103.1104.4106.9108.9109.5111.0111.7113.3115.0117.3119.9122.4125.2128.6
 Other Professional Expenses—6.89097.4101.5107.8111.3114.9118.2121.8125.2128.6132.8138.2143.2148.1153.2158.3163.8
  AutomobileCPI(U)—Private Transportation1.40096.9100.6110.5109.0112.1114.3119.1120.9125.1129.6135.8140.5144.8149.4154.0158.9
  All OtherCPI(U)—All Items Less Food/Energy5.49097.5101.8107.1111.8115.7119.2122.5126.3129.5133.7138.8143.9149.0154.2159.4165.0
4-Quarter Moving-Average Percent Change
Total—100.0004.13.93.22.62.12.32.22.02.22.42.52.62.62.52.62.7
 Physician Earnings—54.1552.93.33.12.51.61.71.91.82.32.32.32.42.42.32.42.5
  Wages and SalariesAHE—Private345.3422.43.02.62.01.11.21.71.92.62.52.22.22.22.12.22.3
  BenefitsECI—Benefits, Private38.8135.44.85.75.04.14.13.01.51.01.82.33.13.23.13.13.3
 Practice Expenses—45.8455.64.73.32.82.82.92.52.22.12.42.92.82.92.82.82.9
  Non-Physician Compensation—16.2963.33.63.83.32.12.12.22.02.32.32.42.42.42.42.52.6
  Wages and Salaries—13.7863.03.23.43.01.91.82.01.92.52.52.52.22.32.22.42.4
   Professional/TechnicalECI—W/S: Professional/Technical33.7903.53.63.73.22.52.01.81.62.62.32.32.32.32.22.42.5
   ManagersECI—W/S: Administrative./Managerial32.6202.33.13.83.30.81.82.02.23.02.82.52.32.22.12.32.3
   ClericalECI—W/S: Clerical5.0743.33.33.32.72.12.12.22.12.42.42.62.22.32.42.42.4
   CraftECI—W/S: Craft30.0692.22.52.42.31.51.61.91.92.22.42.32.22.32.02.12.2
   ServicesECI—W/S: Service Occupations32.2332.42.72.93.01.50.91.61.62.02.72.32.22.22.12.42.5
  Employee BenefitsECI—Benefits, Private White Collar32.5104.85.45.95.13.73.73.62.11.21.72.43.23.33.23.23.4
 Office ExpensesCPI(U)—Housing10.2803.73.84.53.92.92.72.52.52.93.33.42.92.93.02.83.0
 Medical Materials/SuppliesPPI—Drugs/PPI—Surgical/CPI—Medical Supplies5.2514.36.16.35.74.64.03.02.12.22.02.83.13.43.53.63.7
 Professional Liability InsuranceHCFA—Professional Liability Premiums4.78028.89.4-6.1-7.71.95.53.60.8-1.20.42.22.92.72.21.81.7
 Medical EquipmentPPI—Medical Instruments/Equipment2.3481.74.12.61.52.22.10.51.31.21.01.41.72.22.22.22.6
 Other Professional Expenses—6.8904.24.65.14.43.43.12.93.12.72.83.83.83.53.43.43.4.
  AutomobileCPI(U)—Private Transportation1.4003.25.05.22.62.22.33.03.72.83.34.24.03.13.13.13.1
  All OtherCPI(U)—All Items Less Food/Energy5.4904.44.55.04.93.73.32.93.02.72.63.73.73.63.53.53.4

For data sources used to estimate the index relative weights and choice of price proxies, see the November 25, 1992, Federal Register.

Category weights may not sum to total because of rounding.

Series are adjusted for productivity using 10-year moving average of output per hour for the non-farm business sector. All series in the compensation portion of the MEI are adjusted for productivity so both economy-wide productivity and physician practice productivity are not included in the update.

NOTES: A dash (—) in the Price/Wage Variable column denotes a total or subtotal produced by adding 2 or more categories. Q designates quarter of year. AHE represents Average Hourly Earnings, ECI represents Employment Cost Index, CPI(U) represents Consumer Price Index for all urban consumers, and PPI represents Producer Price Index. An example of how a percent change is calculated is shown in the NOTES at end of Table 10.

SOURCES: Health Care Financing Administration, Office of the Actuary: Data from the Office of National Health Statistics Division of Health Cost Analysis. First quarter 1997 forecasts were produced under contract to HCFA by Data Resources Inc/McGraw-Hill.

The growth in spending on hospital care can be estimated using the AHA Panel Survey data. The AHA reports that the growth in community hospital operating expenditures (Table 2) and revenues continued to decelerate in 1996. AHA hospital revenues increased 4.0 percent in 1996, following increases of 5.0 percent in 1995 and 4.9 percent in 1994. Total operating expenses grew at similar rates from 1994 to 1996. The growth rates in these indicators suggest that the annual growth in expenditures for hospital care as measured in the national health accounts (NHA) will continue to decelerate through 1996. Preliminary estimates of the growth in expenditures for physician services, dental services, and nursing home care can be prepared using implied non-supervisory payroll data (Table 6) developed from the Bureau of Labor Statistics (BLS) establishment survey. For physician services, the 1996 growth rate in implied payrolls was 10.4 percent, an acceleration from the 6.4-percent growth registered in 1995. For dental services, the growth in implied payrolls was 9.9 percent in 1996, an acceleration in growth compared with the 7.1 percent increase in 1995. For nursing homes, the growth in implied payrolls in 1996 was 4.8 percent, a deceleration when compared with 6.5-percent growth recorded in 1995. The rates of growth in the indicators for these three components suggest an acceleration in the growth of expenditures for physicians' services and dental services and a deceleration in the growth of expenditures for nursing home care.
Table 6

Percent Change in Implied Non-Supervisory Payrolls, Employment, Average Weekly Hours, and Average Hourly Earnings in Private Sector Health Service Establishments, by Selected Type of Establishment: 1988-96

Type of EstablishmentCalendar Year1994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
198819891990199119921993199419951996
Annual Percent ChangePercent Change From the Same Period of Previous Year
Health Services
Payrolls10.812.311.210.38.56.65.45.76.25.55.35.35.65.85.35.76.15.96.46.46.3
 Employment4.45.24.74.73.73.02.52.93.42.62.62.52.52.62.63.03.53.63.63.33.0
 Average Weekly Hours0.20.10.30.00.70.10.1-0.2-0.30.10.0-0.10.20.1-0.2-0.1-0.4-0.8-0.5-0.20.2
 Average Hourly Earnings5.96.75.95.33.93.42.72.93.12.72.62.92.83.02.82.73.03.03.23.23.0
Offices and Clinics of Physicians
Payrolls12.015.413.610.67.56.96.26.410.46.55.55.96.96.35.96.17.28.210.611.411.2
 Employment4.85.95.54.64.02.42.54.04.41.91.92.63.43.64.03.94.34.24.64.74.2
 Average Weekly Hours1.51.0-0.40.40.80.20.50.21.00.70.40.10.90.20.10.40.10.41.01.11.4
 Average Hourly Earnings5.37.98.15.32.54.23.12.14.63.83.13.22.42.41.71.72.73.44.65.25.2
Offices and Clinics of Dentists
Payrolls6.910.010.67.56.16.57.37.19.98.17.76.86.66.76.17.18.58.79.810.510.6
 Employment2.33.32.83.12.12.83.04.05.23.13.32.82.93.13.34.55.05.65.64.94.9
 Average Weekly Hours0.6-0.1-0.2-0.40.2-0.3-0.5-0.60.60.1-0.7-0.8-0.5-0.5-0.9-0.8-0.2-0.60.61.30.9
 Average Hourly Earnings3.96.67.84.73.83.84.63.63.84.75.04.84.13.93.63.43.63.53.34.04.4
Nursing Homes
Payrolls7.712.212.110.17.47.18.36.54.89.18.47.87.87.26.36.36.14.85.34.74.3
 Employment2.13.64.35.42.83.33.92.72.74.54.23.93.02.82.52.63.02.72.92.72.4
 Average Weekly Hours0.00.90.90.10.5-0.30.30.5-0.40.20.0-0.21.00.60.30.70.4-0.30.0-0.4-0.8
 Average Hourly Earnings5.47.46.54.43.94.04.03.12.54.24.14.03.63.73.42.92.62.42.32.42.7
Private Hospitals
Payrolls11.611.69.49.47.64.52.23.64.22.21.92.22.53.23.53.54.44.24.44.13.9
 Employment5.04.53.33.22.70.6-0.70.61.9-0.7-0.8-0.8-0.5-0.20.30.81.42.02.01.81.8
 Average Weekly Hours-0.50.00.70.00.60.50.2-0.3-0.50.50.20.1-0.1-0.1-0.1-0.6-0.5-0.9-0.9-0.50.1
 Average Hourly Earnings6.86.75.26.04.23.32.73.42.82.42.52.93.13.53.33.33.43.13.32.72.0
Home Health Care Services
PayrollsN/A16.832.131.829.124.424.115.75.626.525.922.422.121.016.315.411.06.25.35.25.8
 EmploymentN/A13.319.418.615.617.919.111.95.021.320.718.416.615.011.911.39.77.36.13.72.9
 Average Weekly HoursN/A-4.1-0.43.24.81.41.71.2-1.81.71.61.12.42.61.91.7-1.4-3.4-3.2-1.20.7
 Average Hourly EarningsN/A7.510.97.86.64.12.52.32.42.62.72.32.32.52.12.02.62.42.62.72.1
Non-Farm Private Sector
Payrolls6.76.54.50.93.15.47.15.65.76.77.07.07.77.05.25.54.74.06.06.16.5
 Employment3.42.71.0-1.60.42.53.83.22.33.23.84.04.24.23.52.92.42.02.32.52.5
 Average Weekly Hours-0.2-0.3-0.3-0.60.20.30.5-0.6-0.10.70.60.30.60.0-1.0-0.5-0.8-1.10.20.10.3
 Average Hourly Earnings3.44.03.73.12.42.52.72.83.32.62.52.62.82.72.73.03.03.13.43.43.5

Excludes hospitals, clinics, and other health-related establishments run by all governments.

NOTES: Data presented here conform to the 1987 Standard Industrial Classification. Q designates quarter of year. Quarterly data are not seasonally adjusted.

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics: Employment and Earnings. Washington. U.S. Government Printing Office. Monthly reports for January 1988-December 1996.

The growth in expenditures for retail purchases of drugs and other medical non-durables can be calculated using the growth rates of the CPI for prescription drugs and the CPI for over-the-counter (OTC) drugs (Table 9). The rate of growth for the two components of the NHE that make up this category, prescription drugs and OTC drug and medical supplies has exceeded the growth of the CPI for prescription drugs and the CPI for OTC drugs in recent years. This suggests that the physical quantity of drugs purchased has increased in addition to the increase in prices. By adding the first difference, in this case the difference in the growth rates of the NHE and CPI components, to the change in the CPI, the increase in quantity can be accounted for and an estimate for the 1996 growth in the NHE components can be approximated. The CPI for prescription drugs grew 3.3 percent in 1996, an acceleration compared with the 1.9-percent growth in 1995 (Table 9). During the same period, the CPI for internal and respitory OTC drugs grew 1.9 percent in 1996 and 0.6 percent in 1995. The acceleration in both components of the CPI in 1996 suggests an acceleration in the growth of the NHE measures of prescription drugs and non-prescription drugs and medical supplies in 1996. Preliminary estimates of five major components of NHE can be calculated by applying the predicted growth rates for 1996 to the 1995 estimates. From 1991 to 1995, the sum of these five components has fluctuated as a share of total NHE, varying from 78.4 percent to 76.6 percent of total NHE during the period. Using the preliminary estimates of the five components and the average of the five component share of NHE as an indicator of the future share, preliminary estimates of total NHE can be prepared. The preliminary estimates indicate that the growth in total NHE continued to decelerate slightly in 1996, but continued to grow slightly faster than GDP (Table 7). Using the preliminary estimates, health expenditures as a percent of GDP can be determined. The preliminary estimates indicate that health expenditures as a share of GDP were 13.7 percent in 1996. Total health expenditures accounted for 13.6 percent of GDP in 1995, and 13.5 percent in 1994. The share of GDP attributable to health expenditures has expanded by approximately 3 percentage points in the last 10 years, rising from 10.7 in 1987 to the predicted 13.7 estimated for 1997.
Table 7

Selected National Economic Indicators: 1988-96

IndicatorCalendar Year1994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
198819891990199119921993199419951996
Gross Domestic Product
Billions of Dollars5,0505,4395,7445,9176,2446,5536,9367,2547,5766,7766,8916,9937.0837,1507,2057,3107,3517,4277,5457,6167,716
Billions of 1992 Chain Weighted Dollars5,8636,0606,1396,0796,2446,3866,6096,7436,9076,5666,5886,6456,6946,7016,7146,7766,7816,8146,8936,9286,994
Implicit Price Deflator (1992 = 100.0)86.189.793.697.3100.0102.6104.9107.6109.7104.1104.6105.2105.8106.7107.3107.9108.4109.0109.5109.9110.3
Personal Income
Personal Income in Billions4,1734,4894,7924,9695,2645,4805,7536,1156,4525,5625,7395,8085,9036,0056,0746,1476,2356,3096,4126,5016,587
Disposable Income in Billions3,6413,8944,1674,3444,6144,7905,0225,3215,5884,8674,9965,0775,1555,2355,2735,3495,4275,4845,5425,6295,700
Prices1
Consumer Price Index, All Items118.3124.0130.7136.2140.3144.5148.2152.4156.9146.7147.6148.9149.6150.9152.2152.9153.6155.0156.5157.4158.5
 All Items Less Medical Care117.0122.4128.8133.8137.5141.2144.7148.6152.8143.3144.1145.4146.0147.1148.4149.0149.7151.0152.5153.3154.4
  Energy89.394.3102.1102.5103.0104.2104.6105.2110.1101.7103.5107.8105.4103.7106.5107.2103.5105.3112.0111.9111.3
  Food and Beverages118.2124.9132.1136.8138.7141.6144.9148.9153.7143.9144.1145.2146.2147.9148.7149.0150.0151.6152.8154.3156.2
 Medical Care138.6149.3162.8177.0190.1201.4211.0220.5228.2207.5209.8212.2214.7217.6219.3221.5223.4226.0227.4229.1230.4
Producer Price Index,2 Finished
 Consumer Goods106.2112.1118.2120.5121.7123.0123.3125.6129.5122.4123.0123.9123.7124.5125.7125.9126.4127.4129.3130.2131.2
 Energy59.865.775.078.177.878.077.078.183.274.476.780.276.976.780.079.476.478.884.284.785.1
 Food112.6118.7124.4124.2123.3125.6126.8129.0133.6127.1126.5126.4127.2128.3128.0129.1130.7131.1132.1134.9136.1
 Finished Goods Except Food and Energy118.5124.0128.8133.7137.3138.5139.0141.9144.3138.6138.7138.7139.8140.8141.6141.7143.7144.0144.2144.0145.0
Annual Percent ChangePercent Change From the Same Period of Previous Year
Gross Domestic Product
Billions of Dollars7.67.75.63.05.54.95.84.64.45.25.96.45.95.54.64.53.63.94.74.25.0
Billions of 1992 Chain Weighted Dollars3.83.41.3-1.02.72.33.52.02.42.93.63.93.53.01.92.01.31.72.72.23.1
Implicit Price Deflator (1992 = 100.0)3.74.24.34.02.72.62.32.52.02.22.22.32.32.52.62.52.42.12.01.91.8
Personal Income
Personal Income in Billions7.67.66.73.76.04.15.06.35.54.05.15.65.27.95.85.85.65.15.65.85.7
Disposable Income in Billions8.37.07.04.26.23.84.86.05.03.64.75.75.37.85.55.35.34.85.15.25.0
Prices1
Consumer Price Index, All Items4.14.85.44.23.03.02.62.82.92.52.42.92.72.83.12.62.72.72.82.93.2
 All Items Less Medical Care3.94.65.23.92.72.72.52.72.92.42.22.72.52.73.02.52.52.72.82.93.1
  Energy0.85.78.20.40.51.10.50.64.6-0.9-1.12.31.51.92.9-0.6-1.81.65.24.47.5
  Food and Beverages4.15.75.83.61.42.12.32.83.32.31.92.72.52.73.22.62.62.52.83.64.2
 Medical Care6.57.79.18.77.46.04.84.53.55.04.74.64.84.94.64.44.13.83.73.43.1
Producer Price Index,2 Finished
 Consumer Goods2.55.65.51.91.01.10.21.93.1-0.3-1.00.91.21.72.21.62.22.32.93.43.8
 Energy-3.29.814.14.2-0.40.3-1.21.46.5-3.4-3.51.01.13.04.3-1.0-0.72.85.26.611.5
 Food2.85.54.8-0.2-0.71.90.91.83.52.00.20.80.61.01.22.22.72.23.24.54.1
 Finished Goods Except Food & Energy3.84.63.83.82.70.90.32.11.7-0.5-0.81.01.61.62.02.22.82.31.81.60.9

Base Period = 1982-84, unless noted.

Formerly called the “Wholesale Price Index.”

NOTES: Q designates quarter of year. Unlike tables 1-5 quarterly data on GDP, personal income, and disposable personal income, are seasonally adjusted at annual rates.

SOURCES: U.S. Department of Commerce, Bureau of Economic Analysis: Survey of Current Business. Washington. U.S. Government Printing Office. Monthly reports for January 1992-September 1996; U.S. Department of Labor, Bureau of Labor Statistics: Employment and Earnings. Washington. U.S. Government Printing Office. Monthly reports for January 1992- September 1996.

Background Information on Data Sources and Methods

Community Hospital Statistics

Since 1963, the AHA, in cooperation with member hospitals, has been collecting data on the operation of community hospitals through its National Hospital Panel Survey. Community hospitals, which comprised more than 80 percent of all hospital facilities in the United States in 1996, include all non-Federal, short-term general, and other special hospitals open to the public. They exclude hospital units of institutions; psychiatric facilities; tuberculosis, other respiratory, and chronic disease hospitals; institutions for the mentally retarded; and alcohol and chemical dependency hospitals. The survey samples approximately one-third of all U.S. community hospitals. The sample is designed to produce estimates of community hospital indicators by bed size and region (American Hospital Association, 1963-96). In Tables 1 and 2, statistics covering expenses, use, beds, and personnel depict trends in the operation of community hospitals annually for 1988-96 and quarterly for 1994 forward. For purposes of NHE, survey statistics on revenues are analyzed in estimating the growth in the largest component of health care costs—community hospital expenditures. This one segment of NHE accounted for 35 percent of all health spending in 1995 (Levit et al., 1996). The survey also identifies important factors influencing expenditure growth patterns, such as changes in the number of beds in operation, numbers of admissions, length of stay, use of outpatient facilities, and number of surgeries.

Medicare Trust Fund Operations

Separate trust funds finance the operations of the two parts of the Medicare program. The HI program, or Medicare Part A, helps pay for inpatient hospital, home health, SNF, and hospice care for the aged and disabled. The HI program is financed primarily by payroll taxes paid by workers and employers. The taxes paid each year are used mainly to pay benefits for current beneficiaries. The SMI program, or Medicare Part B, pays for physician, outpatient hospital, and other services for the aged and disabled. The SMI program is financed primarily by transfers from the general fund of the U.S. Treasury and by monthly premiums paid by beneficiaries. For both Medicare programs, income not currently needed to pay benefits and related expenses is held in the HI and SMI trust funds and invested in U.S. Treasury securities (Board of Trustees of the Federal Hospital Insurance Trust Fund, 1997; Board of Trustees of the Federal Supplementary Medical Insurance Trust Funds, 1997). Data on the financial operations of the Medicare trust funds, the HI trust fund, and the SMI trust fund are available from two sources. The monthly statistics on trust fund operations are published in the Monthly Treasury Statement of Receipts and Outlays of the United States Government (U.S. Department of the Treasury, 1997). The trust fund operating statistics are presented in Table 8: Trust Fund Impact on Budget Results and Investment Holding. The Annual Reports of the Board of Trustees of the HI and SMI Trust Funds (Board of Trustees, 1997) contain a detailed accounting of all financial operations for the prior fiscal year. The reports also contain actuarial analysis of the expected operations of the trust funds in future years and analysis of the actuarial status of the funds.
Table 8

Index Levels of Medical Prices: 1988-96

IndicatorCalendar Year1994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
198819891990199119921993199419951996
Consumer Price Indexes, All Urban Consumers1
Medical Care Services2138.3148.9162.7177.1190.5202.9213.4224.2232.4209.5212.0214.6217.5221.0223.0225.4227.4230.1231.5233.3234.7
 Professional Services137.5146.4156.1165.7175.8184.7192.5201.0208.3189.3191.8193.5195.5198.3200.2202.0203.4205.9207.5209.2210.7
  Physicians' Services139.8150.1160.8170.5181.2191.3199.8208.8216.4196.7199.2200.7202.4205.6208.1210.1211.5214.3215.8217.1218.3
  Dental Services137.5146.1155.8167.4178.7188.1197.1206.8216.5193.0196.1198.3201.1204.0205.8207.8209.8212.5215.1218.0220.5
 Hospital and Related Services143.9160.5178.0196.1214.0231.9245.6257.8269.5241.3243.4247.2250.6254.2255.6259.1262.2266.1267.7271.0273.1
  Hospital Room143.3158.1175.4191.9208.7226.4239.2251.2261.0235.3237.2240.9243.5247.8249.4252.6255.1257.9259.0262.3264.7
  Other Inpatient Services (1986=100)114.0128.9142.7158.0172.3185.7197.1206.8216.9193.5195.4198.2201.2204.0205.2207.8210.3214.3215.5218.1219.6
  Outpatient Services (1986=100)112.5124.7138.7153.4168.7184.3195.0204.6215.1191.5192.9196.3199.4201.5202.3205.5208.9211.7213.9216.5218.1
Medical Care Commodities139.9150.8163.4176.8188.1195.0200.7204.5210.4198.5200.1201.6202.6203.4203.6204.6206.2208.4209.9211.1212.1
 Prescription Drugs152.0165.2181.7199.7214.7223.0230.6235.0242.9228.0230.5231.0232.8233.4233.9235.4237.4240.1242.3243.7245.3
 Non-Prescription Drugs and Medical Supplies (1986=100)108.1114.6120.6126.3131.2135.5138.1140.5143.1136.7136.8139.4139.4140.5140.0140.4141.2142.5142.9143.6143.6
  Internal and Respitory Over-the-Counter Drugs130.8138.8145.9152.4158.2163.5165.9167.0170.2165.2165.5166.6166.4167.1166.0167.4167.3169.3169.5170.6171.3
  Non-Prescription Medical Equipment and Supplies123.9131.1138.0145.0150.9155.9160.0166.3169.1156.7156.7163.1163.6165.8166.3165.2167.8168.7169.3169.8168.8
Producer Price Indexes3
Industry Groupings: 4
 Health Services (12/94=100)———————102.4104.6————101.6101.9102.5103.4104.1104.4104.7105.2
  Offices and Clinics of Doctors of medicine (12/93=100)——————102.8106.8107.6101.8102.4102.9104.0106.3106.8107.1107.0107.4107.5107.5107.9
   Medicare Treatments (12/93=100)——————104.7109.6105.5104.7104.7104.7104.7109.6109.6109.6109.6105.5105.5105.5105.5
   Non-Medicare Treatments (12/93=100)——————102.3105.9107.8101.0101.8102.4103.8105.5106.1106.1106.0107.5107.7107.8108.2
  Hospitals (12/92=100)—————102.5106.2110.0112.6105.0105.4106.7107.7109.2109.3110.0111.4112.2112.3112.7113.4
   General Medical and Surgical Hospitals (12/92=100)—————102.4106.0109.9112.5104.8105.2106.5107.5109.0109.2109.9111.5112.2112.2112.5113.2
    Inpatient Treatments (12/92=100)—————102.5106.0109.2111.8104.9105.2106.4107.5108.5108.6109.1110.9111.5111.6111.6112.4
     Medicare Patients (12/92=100)—————100.6102.6104.7108.1102.3102.3102.3103.6103.6103.6103.6107.8107.8107.8107.8109.1
     Medicaid Patients (12/92=100)—————102.3107.1109.8112.2105.3106.0108.1108.9109.5109.6109.3110.6111.7112.5111.9112.5
     All Other Patients (12/92=100)—————103.5107.7111.7113.7106.3106.7108.4109.4111.0111.1112.0112.6113.6113.4113.6114.2
    Outpatient Treatments (12/92=100)—————102.5106.7113.3116.2105.0105.8107.6108.2111.9112.5114.0114.8115.6115.8116.6117.0
     Medicare Patients (12/92=100)—————103.7107.0111.2113.1105.5106.0107.5108.8110.2111.1111.8111.8112.3112.5113.4114.4
     Medicaid Patients (12/92=100)—————101.6103.3106.4106.1101.8101.2105.1105.1105.7105.9105.8108.0107.1107.1105.9104.4
     All Other Patients (12/92=100)—————102.4106.9114.2117.7105.2106.2107.8108.4112.7113.2115.1115.8116.9117.1118.1118.6
  Skilled and Intermediate Care Facilities (12/94=100)———————103.6110.0————101.9102.8104.2105.6108.2109.5110.7111.6
   Public Payors (12/94=100)———————103.8110.5————101.8102.7104.4106.2108.6110.1111.2112.1
   Private Payors (12/94=100)———————103.6109.8————102.1103.2104.2105.1108.2109.1110.4111.4
  Medical Laboratories (6/94=100)———————104.0105.3——100.099.9101.6103.4106.0105.0105.3105.2105.3105.3
Commodity Groupings:
 Drugs and Pharmaceuticals148.4160.0170.8182.6192.2200.9206.0210.9214.7204.6205.9206.3207.0208.5210.3211.2213.4213.8214.6215.2215.2
  Ethical (Prescription) Preparations169.0184.4200.8217.5231.7242.2250.0257.0265.4248.3250.1250.0251.4252.7255.8257.6261.8262.5265.1266.8267.0
  Proprietary (Over-the-Counter) Preparations144.4152.1156.8165.4173.6180.0183.2186.6185.1181.4182.6184.4184.5185.5186.6186.6187.5188.3184.5183.3184.2
 Medical, Surgical, and Personal Aid Devices118.9123.0127.3130.3133.9137.8140.4141.3143.1140.1140.3140.6140.5140.7140.8141.5142.1143.5143.4142.6142.7
  Personal Aid Equipment111.2111.8113.9117.1120.2122.3130.1133.7139.3127.8130.8130.9130.9131.2131.8135.1136.7136.8139.8140.2140.3
  Medical Instruments and Equipment (6/82=100)111.4115.9118.9120.7123.4126.0126.7128.3130.1126.4126.5126.8126.9127.8128.0128.8128.7130.3130.1129.7130.1
  Surgical Appliances and Supplies (6/83=100)125.2129.8135.9140.7145.0151.0155.7154.8156.9155.4155.7156.1155.4154.3154.1154.5156.2157.4158.1156.3155.8
  Ophthalmic Goods (12/83=100)110.8113.8115.0116.0118.0119.0119.6122.2120.3120.0119.4119.4119.8121.7121.8122.9122.6122.2119.7119.8119.5
  Dental Equipment and Supplies (6/85=100)113.0114.2118.9121.2126.6131.5135.2137.5141.0134.2135.0136.0135.7136.4137.9137.1138.7140.7140.7141.0141.7

Unless otherwise noted, base year is 1982-84 = 100

Includes the net cost of private health insurance, not shown separately.

Unless otherwise noted, base year is 1982 = 100. Producer price indexes are classified by industry (price changes received for the industry's output sold outside the industry) and commodity (price changes by similarity of end use or material composition).

Further detail for Producer Price Industry groupings, such as types of physician practices, hospital DRG groupings, etc., are available from BLS.

NOTES: Q designates quarter of year. Quarterly data are not seasonally adjusted.

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics: CPI Detailed Report. Washington. U.S. Government Printing Office. Monthty reports for January 1988-December 1996; U.S. Department of Labor, Bureau of Labor Statistics: Producer Pric Indexes. Washington. U.S. Government Printing Office. Monthly reports for January 1988-December 1996.

Private Health Sector: Employment, Hours, and Earnings

The BLS collects monthly information on employment for all workers, and employment, earnings and work hours for non-supervisory workers in a sample of approximately 340,000 establishments. Data are collected through cooperative agreements with State agencies that also use this information to create State and local area statistics. The survey is designed to collect industry-specific information on wage and salary jobs in non-agricultural industries. It excludes statistics on self-employed persons and on those employed in the military (U.S. Department of Labor, 1996). Employment in this survey is defined as number of jobs. Persons holding multiple jobs would be counted multiple times. Approximately 5 percent of the population hold more than one job at any one time. (Other surveys that are household-based, such as the Current Population Survey [CPS], also record employment. In the CPS, however, each person's employment status is counted only once, as either employed, unemployed, or not in the labor force.) Once each year, monthly establishment-based employment statistics are adjusted to benchmarks created from annual establishment census information, resulting in revisions to previously published employment estimates. Tables 4, 5, and 6 present statistics on employment, non-supervisory employment, average weekly hours, and average hourly earnings for the private non-farm business sector and industries in health services.
Table 4

Employment, Hours, and Earnings in Private Sector Health Service Establishments, by Selected Type of Establishment: 1988-96

Type of EstablishmentCalendar Year1994Q11994Q21994Q31994Q41995Q11995Q21995Q31995Q41996Q11996Q21996Q31996Q4
198819891990199119921993199419951996
Total Employment (in Thousands)
Non-Farm Private Sector87,82490,11791,11589,85489,95991,88995,04497,892100,09492,09694,81196,34796,92395,64697,85398,92899,14297,489100,024101,303101,559
 Health Services7,1057,4637,8148,1838,4908,7568,9929,2579,5668,8788,9659,0429,0839,1199,2099,3099,3899,4419,5409,6149,669
  Offices and Clinics of Physicians1,1991,2681,3381,4041,4631,5061,5451,6061,6721,5191,5361,5571,5681,5771,5971,6171,6321,6391,6651,6871,696
  Offices and Clinics of Dentists484500513528541556574597625565573576581584593602609614622628636
  Nursing Homes1,3111,3561,4151,4931,5331,5851,6491,6931,7421,6261,6421,6611,6661,6711,6831,7041,7151,7171,7351,7541,760
  Private Hospitals3,2943,4383,5493,6553,7503,7793,7633,7843,8523,7623,7623,7693,7593,7583,7743,7943,8093,8283,8463,8603,873
  Home Health Care Services216244291345398469559626657523553571591603619635648647658659667
Non-Supervisory Employment (in Thousands)
Non-Farm Private Sector71,10673,03473,80072,65072,93074,77777,61080,12381,99874,87877,42078,80679,33778,04380,09781,08281,27279,61581,96283,09483,319
 Health Services6,3116,6366,9487,2767,5467,7707,9668,2008,4777,8697,9498,0078,0418,0758,1598,2478,3198,3668,4558,5198,569
  Offices and Clinics of Physicians9881,0471,1051,1551,2021,2311,2611,3111,3691,2421,2531,2701,2781,2871,3031,3201,3331,3401,3631,3821,389
  Offices and Clinics of Dentists424437450464473487501521549495501503507510518525532539546551558
  Nursing Homes1,1841,2261,2791,3471,3851,4311,4871,5271,5681,4651,4811,4981,5021,5061,5181,5371,5471,5461,5621,5781,583
  Private Hospitals3,0103,1453,2483,3533,4423,4643,4413,4603,5263,4413,4423,4443,4353,4353,4523,4703,4843,5033,5203,5343,547
  Home Health Care Services199225269319369435518579608485512528546558573588599599608609617
Average Weekly Hours
Non-Farm Private Sector34.734.634.534.334.434.534.734.534.434.334.734.934.834.334.434.734.533.934.434.834.6
 Health Services32.432.532.532.532.832.832.832.832.632.832.832.832.832.832.732.832.732.532.532.732.8
  Offices and Clinics of Physicians31.631.931.831.932.232.232.432.532.832.432.332.332.632.432.432.532.732.632.732.833.1
  Offices and Clinics of Dentists28.528.528.428.328.428.328.128.028.128.228.228.028.228.028.027.828.127.928.128.128.4
  Nursing Homes31.631.832.132.232.332.232.332.532.332.132.232.532.432.332.332.832.532.232.332.632.3
  Private Hospitals34.034.034.234.234.434.634.734.534.434.734.634.734.634.734.634.534.434.434.334.334.4
  Home Health Care Services26.525.425.326.127.427.828.228.628.128.028.228.228.528.728.728.728.127.727.828.328.3
Average Hourly Earnings
Non-Farm Private Sector9.289.6510.0110.3210.5710.8311.1211.4411.8211.0511.0611.1011.2711.3511.3611.4411.6011.7011.7511.8212.01
 Health Services9.219.8310.4010.9611.3911.7812.1012.4512.8312.0012.0212.1312.2512.3612.3612.4612.6112.7312.7612.8512.99
  Offices and Clinics of Physicians9.079.7810.5811.1411.4211.8912.2612.5213.1012.1612.2212.2912.3612.4512.4312.4912.7012.8813.0113.1413.36
  Offices and Clinics of Dentists8.829.4110.1410.6211.0211.4411.9712.4012.8811.7811.9212.0112.1712.2512.3512.4112.6012.6812.7612.9113.16
  Nursing Homes6.336.807.247.567.868.178.508.768.988.408.448.538.618.718.738.788.838.928.938.999.07
  Private Hospitals10.5111.2111.7912.5013.0313.4613.8314.3014.6913.7013.7013.8914.0414.1714.1614.3414.5214.6214.6214.7314.81
  Home Health Care Services7.307.858.709.3810.0010.4110.6710.9111.1710.5810.6210.7110.7510.8410.8410.9211.0311.1111.1211.2111.26
Addenda: Hospital Employment (in Thousands)
 Total4,6004,7404,8534,9585,0685,1005,0775,0925,1545,0805,0775,0835,0685,0655,0805,1065,1165,1335,1495,1605,172
 Private3,2943,4383,5493,6553,7503,7793,7633,7843,8523,7623,7623,7693,7593,7583,7743,7943,8093,8283,8463,8603,873
 Federal241227232234235234234232227236234234232230232235231231229226223
 State446442426417419414407397383409408406405404398394393390385380377
 Local619632646653665673673679692673672675672673677681683685689694698

Excludes hospitals, clinics, and other health-related establishments run by all governments.

NOTES: Data presented here conform to the 1987 Standard Industrial Classification. Q designates quarter of year. Quarterly data are not seasonally adjusted.

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics: Employment and Earnings. Washington. U.S. Government Printing Office. Monthly reports for January 1988-December 1996.

National Economic Indicators

National economic indicators provide a context for understanding health-specific indicators and how change in the health sector relates to change in the economy as a whole. Table 7 presents national indicators of output and inflation. GDP measures the output of the U.S. economy as the market value of goods and services produced within the geographic boundaries of the United States by U.S. or foreign citizens or companies. Constant dollar or “real” GDP removes the effects of price changes from the valuation of goods and services produced, so that the growth of real GDP reflects changes in the physical quantity of the output of the economy. In the most recent comprehensive revision of the National Income and Product Accounts, the method for removing the effects of price changes was altered. The GDP estimates are now deflated using chain-weighted price indexes. This method replaces the previous fixed-weighted method of deflating the GDP estimates (U.S. Department of Commerce, 1996).

Prices

Consumer Price Indexes

The BLS publishes monthly information on changes in prices paid by consumers for a fixed market basket of goods and services. Tables 7, 8, and 9 present information on the all urban CPI that measures changes in prices faced by 80 percent of the non-institutionalized population in the United States. (The more restrictive wage earner CPI gauges prices faced by wage earners and clerical workers. These workers account for 32 percent of the non-institutionalized population [U.S. Department of Labor, 1996].) The index reflects changes in prices charged for the same quality and quantity of goods or services purchased in the base period. For most items, the base period of 1982-84 is used to define the share of consumer expenditures purchasing specific services and products. Those shares or weights remain constant in all years, even though consumption patterns of the household may change over time. This type of index is called a fixed weight or Laspeyres index. CPIs for health care goods and services depict list price changes for out-of-pocket expenditures. The CPI for medical care services also includes an indirect measure of price change for health insurance coverage purchased directly by consumers. The composite CPI for medical care weights together product-specific or service-specific CPIs in proportion to household out-of-pocket expenditures for these items. In addition, some medical care sector indexes measure changes in list or charged prices, rather than in prices actually received by providers after discounts are deducted. In several health care areas, received or transaction prices are difficult to capture, although the BLS is making advances in this area. In the NHE, a combination of CPIs for selected medical care items, input price indexes for nursing homes, and the PPI for hospitals are used as measures of inflation for the health industry. The indexes are used to develop a chain-weighted price index for personal health care to depict price changes affecting the entire health care industry more accurately than does the overall CPI medical care index (Levit et. al, 1995).

Producer Price Indexes

The BLS produces monthly information on average changes in selling prices received by domestic producers for their output These prices are presented in Tables 7, 8, and 9 as the PPL The index is designed to measure transaction prices, and is different from the CPI, which in some cases measures list or full charge prices. The PPI is a fixed-weight or Laspeyres index, with base period weights determined by values of receipts. The base period varies among series. The PPI consists of indexes in several major classification structures, including the industry and commodity classifications that are included in the Health Care Indicators. The PPI by industry classification measures price changes received for the industry's output sold outside the industry. PPI changes for an industry are determined by price changes for products primarily made by establishments in that industry. The industry into which an establishment is classified is determined by those products accounting for the largest share of its total value of shipments. The PPI by commodity classification measures price changes of the end product (end use or material composition). The classification system for PPI commodity groups is unique to the PPI, and is divided into fifteen major commodity groupings. Although PPIs for medical commodities have existed for many years, PPIs for health service industries are relatively new. Most index series began in 1994, and the index series for the composite health services industry does not begin until December 1994. However, the PPI for hospitals began in December 1992, providing enough data for a useful time series. The PPI for hospitals is a measure of transaction prices or net prices received by the producer from out-of-pocket, Medicare, Medicaid, and private third-party payor sources. The PPI for hospitals should not be compared with the CPI for hospital and related services. Although other PPI and CPI series are somewhat comparable (for example, the PPI-offices and clinics of doctors of medicine and the CPI-physicians' services), the PPI and CPI for hospitals have important differences in survey scope and methodology. The PPI for hospitals measures price changes for the entire treatment path, measures net transaction price, includes Medicare and Medicaid, samples both urban and rural hospitals, and reflects total hospital revenue from all sources in its index weights. On the other hand, the CPI for hospitals measures price changes for a discrete sample of hospital services singly, measures published charges, excludes Medicare and Medicaid, samples only urban hospitals, and reflects only consumer out-of-pocket expenses and household health insurance premium payments in its index weights. These differences make a direct comparison between the PPI and CPI hospital services indexes inappropriate. The PPI for the health services industry is available by detailed industry groupings. For example, general medical and surgical hospitals consist of inpatient and outpatient treatments, which in turn consist of Medicare, Medicaid, and all other patients. These patient categories consist of more detail, such as DRG groupings for Medicare. Although most of the data used to measure PPI price changes for health services are collected through a sample, there are specific instances where data are collected from both a sample and from price changes in Federal regulation. This is the case for Medicare hospital inpatient services, and Medicare offices and clinics of doctors of medicine. The producer price changes in Medicare hospital inpatient services are computed from a combination of a national sample of diagnosis-related groups (DRGs) in hospitals, DRG relative weights from the PPS final rules published in the current and historical year and other adjustments. The producer price changes in Medicare offices of doctors of medicine are computed from a combination of a geographic area sample of payments under the HCFA Common Procedure Coding System (HCPCS), HCPCS updates from the November 22, 1996, Federal Register, and other adjustments. Because of different methodologies, these two Medicare PPIs are not comparable with the national updates computed by HCFA and published in the Federal Register.

Input Price Indexes

In 1979, HCFA developed the Medicare hospital input price index (hospital “market basket”) which was designed to measure the pure price changes associated with expenditure changes for hospital services. In the early 1980s, the SNF and HHA input price indexes, often referred to as market baskets, were developed to price a consistent set of goods and services over time. Also in the early 1980s, the original Medicare hospital input price index was revised for use in updating payment rates for routine costs of Medicare inpatient services. All of these indexes have played an important role in helping to set Medicare payment percent increases, and in understanding the contribution of input price increases to growing health expenditures. The input price indexes, or market baskets, are Laspeyres or fixed-weight indexes that are constructed in two steps. First, a base period is selected. For example, for the PPS hospital input price index, the base period is 1992. Cost categories, such as food, fuel, and labor, are identified and their 1992 expenditure amounts determined. The proportion or share of total expenditures included in specific spending categories is calculated. These proportions are called cost or expenditure weights. There are 26 expenditure categories in the 1992-based PPS hospital input price index. Second, a price proxy is selected to match each expenditure category. Its purpose is to measure the rate of price increases of the goods or services in that category. The price proxy index for each spending category is multiplied by the expenditure weight for the category. The sum of these products (weights multiplied by the price index) over all cost categories yields the composite input price index for any given time period, usually a fiscal year or a calendar year. The percent change in the input price index is an estimate of price change over time for a fixed quantity of goods and services purchased by a provider. The input price indexes are estimated on a historical basis and forecasted out several years. The HCFA-chosen price proxies are forecasted under contract with Data Resources, Inc./McGraw Hill (DRI). Following every calendar year quarter, in March, June, September, and December, DRI updates its macroeconomic forecasts of wages and prices based on updated historical information and revised forecast assumptions. Some of the data in Tables 10-12 are forecasted and are expected to change as more recent historical data become available and subsequent quarterly forecasts are revised. The methodology and price proxy definitions used in the input price indexes are described in the Federal Register notices that accompany the revisions of the PPS, HHA, and SNF cost limits. A description of the current structure of the PPS input price index and the most recent PPS update for payment rates was published in the August 30, 1996, Federal Register. The latest HHA regulatory input price index was published in the July 1, 1996, Federal Register, and the latest SNF input price index was published in the October 7, 1992, Federal Register (also see the June 6, 1994, Federal Register).
Table 10

Calendar Year Index Levels and Four-Quarter Moving Average Percent Change in the Prospective Payment System (PPS) Hospital Input Price Index, by Expense Category: 1988-2003

Expense Category1Price/Wage VariableBase Year Weights FY 922198819891990199119921993199419951996Forecast
1997199819992000200120022003
Index Levels:
Total—100.00087.191.295.998.8101.9104.7107.8110.8113.5116.4119.8123.5127.7131.9136.2141.0
 Compensation—61.39084.989.594.498.6102.2105.6108.7111.5114.5118.3122.1126.3130.8135.4140.1145.2
  Wages and SalariesHCFA Occupational Wage Index450.24486.190.495.098.9101.9105.0108.0110.8114.0117.9121.6125.5129.8134.1138.5143.3
  Employee BenefitsHCFA Occupational Benefits Index411.14679.385.291.997.5103.7108.2112.0114.6116.7120.1124.3129.6135.2141.3147.2153.6
 Other Professional FeesECI—W/S: Professional/Technical (Private)2.12784.188.893.898.3102.7106.0109.4112.1115.4119.4123.2127.6132.3137.1142.1147.7
 Energy and Utilities3—2.47089.193.5102.398.6101.1102.6102.7101.8108.2108.0107.8109.1111.4113.1116.2119.6
 Professional Liability InsuranceHCFA—Professional Liability Premium1.18998.596.696.798.6102.0103.8100.998.297.996.597.6100.5102.4101.4100.2101.2
 All Other—32.82590.794.198.299.2101.4103.0106.7110.6112.4114.1117.0120.1123.7127.4131.3135.7
  Other Products3—24.03392.295.499.199.3101.2102.4106.1110.3111.0112.0114.3116.9120.2123.3126.9130.8
   PharmaceuticalsPPI—Prescription Drugs4.16276.283.289.997.5103.0107.0110.0114.6116.8120.0124.0128.8134.2140.0146.3153.0
   Food: Direct PurchasePPI—Processed Foods2.36394.297.399.999.7100.0102.4102.1106.3110.8111.1113.0115.1117.4119.9122.5125.4
   Food: Contract ServiceCPI—Food Away From Home1.09688.392.496.699.4100.9102.9104.7107.2110.3114.1118.8123.4127.8132.2136.8141.3
   ChemicalsPPI—Industrial Chemicals3.795103.4102.6108.9100.6101.3100.7111.9115.0117.3115.3117.7119.8123.1126.5130.7134.9
   Medical InstrumentsPPI—Medical Instruments/Equipment3.12892.295.597.598.7101.0102.9103.5104.9105.6107.1108.7110.8113.4115.7118.4121.6
   Rubber and PlasticsPPI—Rubber/Plastic Products4.86896.998.1100.099.9100.8101.4104.7108.6107.8108.3108.8109.8111.6113.2114.9116.9
   Paper ProductsPPI—Converted Paper and Paperboard2.06294.099.7100.899.5100.198.9105.8119.9111.8113.7117.4121.3125.8129.8133.8138.8
  Other Services 3/—8.79286.790.795.598.8102.0104.9108.3111.3116.1119.6124.5128.9133.5138.6143.5149.1
Business ServicesECI—W/S: Business Services3.82385.989.695.098.2102.5104.9108.8111.7116.5120.5125.2129.9135.0139.8144.9151.1
Computer ServicesAHE—Data Processing Services1.92786.092.598.099.6102.0106.6110.7114.2122.1125.6132.0137.3142.9148.6154.8161.9
4-Quarter Moving-Average Percent Change:
Total—100.0005.25.34.73.93.13.02.73.12.42.52.83.03.33.33.33.4
 Compensation—61.3904.85.35.64.73.93.53.12.62.83.03.23.33.53.63.53.6
  Wages and SalariesHCFA Occupational Wage Index450.2444.54.95.14.43.53.12.92.63.03.13.23.23.33.43.33.4
  Employee BenefitsHCFA Occupational Benefits Index411.1466.16.97.96.66.25.24.02.42.02.73.34.14.34.44.24.4
 Other Professional FeesECI—W/S: Professional/Technical (Private)2.1274.95.15.74.94.63.93.32.43.13.03.23.53.73.73.63.8
 Energy and Utilities3—2.470-1.05.53.81.70.92.60.6-0.23.82.6-1.40.71.51.72.22.9
 Professional Liability InsuranceHCFA—Professional Liability Premium1.18924.20.6-0.11.33.33.0-1.8-3.2-0.3-1.70.32.72.5-0.3-1.50.3
 All Other—32.8255.95.43.42.51.62.02.34.71.61.62.32.62.93.03.03.2
  Other Products3—24.0336.25.62.81.81.21.71.95.41.00.91.82.22.62.72.83.0
   PharmaceuticalsPPI—Prescription Drugs4.1627.99.18.98.46.54.53.22.83.32.63.13.74.14.34.44.6
   Food: Direct PurchasePPI—Processed Foods2.3634.54.53.50.00.21.61.21.25.01.21.91.82.02.12.22.3
   Food: Contract ServiceCPI—Food Away From Home1.0964.04.64.73.42.01.81.72.32.53.44.04.03.73.53.43.4
   ChemicalsPPI—Industrial Chemicals3.79511.97.5-1.4-1.3-2.31.13.512.4-1.2-0.21.01.62.42.83.23.2
   Medical InstrumentsPPI—Medical Instruments/Equipment3.1281.74.12.61.52.22.10.51.31.21.01.41.72.22.22.22.6
   Rubber and PlasticsPPI—Rubber/Plastic Products4.8686.23.00.91.30.00.81.45.7-0.40.20.40.71.41.51.51.7
   Paper ProductsPPI—Converted Paper and Paperboard2.0627.27.12.7-0.30.0-0.82.214.9-2.3-1.23.13.23.53.53.13.6
  Other Services3—8.7925.25.05.14.32.83.03.42.93.43.63.83.63.63.93.63.6
   Business ServicesECI—W/S: Business Services3.8235.54.75.64.53.52.93.92.73.63.73.83.73.93.83.73.7
   Computer ServicesAHE—Data Processing Services1.9277.57.56.53.11.54.14.33.54.94.84.14.64.14.04.14.2

For data sources used to estimate the input price index relative weights and choice of price proxies, see the August 30, 1996, Federal Register. For the most recent PPS update for payment rates, see the August 30, 1996, Federal Register.

Category weights may not sum to total or subtotals because of detail not included.

Represents a subtotal. Detailed categories not shown are listed below by subtotal, detailed category, and base year weight:

Energy and Utilities: Fuel Oil, Coal, and Other Fuel (0.345), Electricity (1.349), Natural Gas (0.670), and Water and Sewage (0.106).

Other Products: Photographic Supplies (0.399), Apparel (0.875), Machinery and Equipment (0.211), and Miscellaneous Products (1.074).

Other Services: Transportation and Shipping (0.188), Telephone (0.531), Postage (0.272), Other-Labor Intensive (1.707).

and Other-Non-Labor Intensive (0.344).

The HCFA Occupational Wage and Occupational Benefit Indexes are computed as the weighted-average of 10 ECI categories (ECI for Hospital workers and 9 ECI occupational categories).

NOTES: A dash (—) In the Price/Wage Variable column denotes a total or subtotal produced by adding 2 or more categories.

ECI represents Employment Cost Index, PPI represents Producer Price Index, and AHE represents Average Hourly Earnings.

HCFA is Health Care Financing Administration. W/S is wages and salaries. FY is fiscal year. Q designates quarter of year. The 4-quarter moving-average percent change for the quarter indicated by the column heading is the rate of change in the average index level for 4-quarters ending in that quarter over the same period of the previous year. The 4-quarter moving-average index level for the quarter indicated by the column heading is computed by summing the index level for that quarter and the prior 3 quarters and dividing by 4. The process is repeated to compute the 4-quarter moving-average index level for the same quarter one year ago.

The average index level for the quarter indicated by the column heading is divided by the average index level of the same quarter one year ago, and the quotient is subtracted from 1 and multiplied by 100 to determine the 4-quarter moving-average percent change in the index.

SOURCES: Health Care Financing Administration, Office of the Actuary: Data from the Office of National Health Statistics, Division of Health Cost Analysis. First quarter 1997 forecasts were produced under contract to HCFA by Data Resources, Inc./McGraw-Hill.

Table 12

Calendar Year Index Levels and Four-Quarter Moving-Average Percent Change of the Home Health Agency (HHA) Input Price Index, by Expense Category: 1988-2003

Expense Category1Price/Wage VariableBase Year Weights FY 934198819891990199119921993199419951996Forecast
1997199819992000200120022003
Index Levels
Total—100.00083.287.291.895.698.8101.8104.8107.5110.5114.1117.9121.8126.1130.5135.0139.7
 Compensation2—77.66882.886.991.595.598.7101.8104.9107.4110.4114.1117.6121.6125.9130.2134.8139.7
  Wages and Salaries2HHA Occupational Wage Index564.22684.488.392.596.298.9101.7104.7107.3110.5114.4117.9121.6125.7129.8134.2138.8
  Employee Benefits2HHA Occupational Benefits Index513.44275.280.686.692.197.8102.5105.7107.8109.6112.8116.6121.5126.6132.2137.6143.5
 Operations and MaintenanceCPI(U)—Fuel and Other Utilities0.83287.189.693.896.098.3101.1101.3102.5106.9109.4110.9112.7115.2117.6120.4123.2
 Administrative and General3—9.56983.687.191.495.998.7101.8104.4108.8111.8114.9119.4123.2127.2132.6137.0141.6
  TelephoneCPI(U)—Telephone Services0.72596.397.097.799.799.5101.1102.0103.0105.3106.9109.7112.4114.9117.5120.0122.5
  Paper and PrintingCPI(U)—Household Paper Products0.52990.195.198.899.5100.3101.7101.7112.4113.8115.0117.1119.3122.0124.9127.9130.9
  PostageCPI(U)—Postage0.72486.186.186.1100.0100.0100.0100.0110.3110.3110.3122.3122.3122.3135.6135.6135.6
  Other Administrative Costs3CPI(U)—Services7.59181.785.890.894.998.4102.1105.3108.9112.5116.1120.3124.6129.2134.3139.4144.8
 TransportationCPI(U)—Private Transportation3.40586.289.598.397.099.8101.7105.9107.5111.3115.3120.8125.0128.9132.9137.0141.3
 Capital-Related—3.20487.391.094.496.999.1101.6104.5107.2109.4112.9116.4120.6125.1128.5133.1137.2
  InsuranceCPI(U)—Household Insurance0.56089.692.093.695.998.8102.4106.5108.3112.3116.3119.5122.9125.7128.2130.9133.4
  Fixed CapitalCPI(U)—Owner's Equivalent Rent1.76483.988.292.695.998.8101.9105.5109.1112.2116.5120.9126.2132.3136.6142.9148.1
  Movable CapitalPPI—Machinery and Equipment0.88092.595.998.399.499.7100.3101.2102.6101.9103.4105.5107.7110.1112.5114.9117.6
 Other Expenses3CPI(U)—All Items Less Food and Energy5.32283.386.991.495.598.8101.8104.6107.8110.6114.1118.6122.9127.2131.7136.2140.9
4-Quarter Moving-Average Percent Change
Total—100.0004.44.85.14.63.63.22.92.72.73.03.33.33.43.53.43.5
 Compensation2—77.6684.54.95.24.63.83.33.02.62.73.13.23.33.53.53.53.6
  Wages and Salaries2HHA Occupational Wage Index564.2264.24.64.84.33.32.92.82.62.93.23.23.23.33.33.33.4
  Employee Benefits2HHA Occupational Benefits Index513.4426.26.97.66.66.25.53.72.21.72.73.23.94.24.34.14.3
 Operations and MaintenanceCPI(U)—Fuel and Other Utilities0.8321.43.23.63.32.23.01.20.73.13.81.21.62.02.12.22.4
 Administrative and General3—9.5694.44.54.65.33.23.12.83.93.02.73.93.13.24.23.33.3
  TelephoneCPI(U)—Telephone Services0.725-0.41.00.41.60.60.71.60.81.52.22.32.52.32.32.22.1
  Paper and PrintingCPI(U)—Household Paper Products0.5293.16.04.51.60.80.30.96.55.60.71.51.92.12.42.42.3
  PostageCPI(U)—Postage0.72410.13.10.014.81.20.00.010.30.00.010.90.00.010.90.00.0
  Other Administrative Costs3CPI(U)—Services7.5914.64.95.55.13.93.83.33.43.23.23.53.53.73.93.83.8
 TransportationCPI(U)—Private Transportation3.4053.25.05.22.62.22.33.03.72.83.34.24.03.13.13.13.1
 Capital-Related—3.2044.14.14.03.02.42.52.72.82.22.73.33.53.63.03.33.3
  InsuranceCPI(U)—Household Insurance0.5604.12.82.02.32.73.33.73.32.33.73.12.82.52.02.12.0
  Fixed CapitalCPI(U)—Owner's Equivalent Rent1.7645.04.85.43.93.43.23.33.33.23.43.94.34.53.54.24.1
  Movable CapitalPPI—Machinery and Equipment0.8802.63.72.81.90.30.60.91.20.00.61.92.12.32.22.12.2
 Other Expenses3CPI(U)—All Items less Food and Energy5.3224.44.55.04.93.73.32.93.02.72.63.73.73.63.53.53.4

For data sources used to estimate the input price index relative weights and choice of price proxies, see the July 1, 1996, Federal Register.

Includes allocated Contract Services' Labor.

Includes allocated Contract Services' Non-Labor.

Category weights may not sum to total because of rounding.

The HMA Occupational Wage and Occupational Benefit Indexes are computed as weighted-averages of S ECI categories (ECI for Civilian Hospital Workers and 4 ECI occupational categories).

NOTES: A dash (—) in the Price/Wage Variable column denotes a total or subtotal produced by adding 2 or more categories.

CPI(U) represents Consumer Price Index for all urban consumers. CY is calendar year. Q designates quarter of year.

An example of how a percent change is calculated is shown in the Notes at end of Table 10.

SOURCES: Health Care Financing Administration, Office of the Actuary: Data from the Office of National Health Statistics, Division of Health Cost Analysis. First quarter 1997 forecasts were produced under contract to HCFA by Data Resources, Inc/McGraw-Hill.

Periodically, the input price indexes are revised to a new base year so that cost weights will reflect changes in the mix of goods and services that are purchased. Each revision allows for new base weights, a new base year, and changes to certain price variables used for price proxies. Each input price index is presented in a table with both an index level and a 4-quarter moving-average percent change. The hospital input price index for PPS is in Table 10, the SNF input price index is in Table 11, and the HHA input price index is in Table 12.
Table 11

Calendar Year Index Levels and Four-Quarter Moving-Average Percent Change in the Skilled Nursing Facility Input Price Index, by Expense Category: 1988-2003

Expense Category1Price/Wage VariableBase Year Weights CY 772198819891990199119921993199419951996Forecast
1997199819992000200120022003
Index Levels
Total—100.000200.5213.2226.5234.5243.1252.6260.2267.2275.3284.1294.0304.6315.8327.5340.2353.9
 Compensation—70.620201.3214.9227.9237.3246.8257.5266.2273.1280.3290.8302.1313.8325.7338.3351.8366.4
  Wages and SalariesAHE—Nursing Facilities63.020199.2213.3226.1234.5243.5254.3263.5270.3277.7288.4299.6311.2322.9335.2348.4362.5
  Employee BenefitsBEA—Supplement to Wages/Salaries per Work7.600218.4227.9243.0260.0274.4283.6288.5296.3301.6310.4322.1335.4349.1363.8380.2398.0
 Fuel and Other Energy—4.270197.3210.0238.7226.1229.3232.2231.8231.6254.1245.4243.8246.9253.1258.1267.8278.3
  Fuel Oil and CoalIPD—Fuel Oil and Coal1.660173.7196.4263.1216.7210.8204.9202.3201.4242.4217.0207.0204.0207.1208.7218.0228.0
  ElectricityIPD—Electricity1.210198.5203.3206.9215.4219.4223.0223.7230.0231.7231.0231.8234.9238.7242.2246.7251.4
  Natural GasIPD—Natural Gas0.910222.5226.5226.4229.4240.2252.2246.4233.9256.3252.7250.5254.8261.2264.8274.6285.4
  Water and Sewage MaintenanceCPI(U)—Water and Sewage0.490227.7241.9257.5277.9296.3310.7324.2333.4344.8363.6385.9407.7429.6452.3476.0501.6
 Food—9.740169.4177.0183.6186.4188.3193.0195.4201.8210.3214.0218.6224.2230.2236.6243.4250.7
  Direct PurchasePPI—Processed Foods4.930155.8161.0165.4164.9165.4169.3168.7175.7183.0183.6186.7190.2194.1198.3202.7207.4
  Contract ServiceCPI(U)—Food and Beverages4.810183.4193.3202.3208.4211.8217.2222.8228.6238.3245.3251.3258.9267.1275.9285.2295.2
 All Other—15.370217.6229.5244.1254.6264.6273.6281.8291.0299.9308.5318.6329.6341.7354.7368.3382.7
  PharmaceuticalsPPI—Prescription Drugs1.500264.8289.1312.5338.9358.2371.9382.5398.3406.1417.1431.0447.7466.5486.6508.4531.9
  SuppliesCPI(U)—All Items3.280198.5207.7220.6227.2234.1240.5246.9253.4261.5268.0275.6284.0293.4303.4314.0325.3
  Health ServicesCPI(U)—Physicians' Services1.210244.2261.8281.3296.7315.5331.9346.0361.5373.2388.3404.4421.9440.7460.4481.0502.7
  Other Business ServicesCPI(U)—Services4.590228.8240.0253.3264.1274.2284.4293.2303.4313.4323.3334.8346.8359.8374.0388.3403.4
  Miscellaneous CostsCPI(U)—All Items4.790198.5207.7220.6227.2234.1240.5246.9253.4261.5268.0275.6284.0293.4303.4314.0325.3
4-Quarter Moving-Average Percent Change
Total—100.0004.96.56.34.43.83.73.42.92.73.23.43.63.63.73.84.0
 Compensation—70.6205.27.06.54.74.34.03.83.02.43.53.93.93.83.84.04.1
  Wages and SalariesAHE—Nursing Facilities63.0205.47.46.54.43.94.04.03.12.53.63.93.83.83.83.94.0
  Employee BenefitsBEA—Supplement to Wages/Salaries per Work7.6003.93.76.07.06.63.92.22.21.62.53.74.04.14.14.44.6
 Fuel and Other Energy—4.2701.13.68.90.80.22.50.7-0.36.01.8-2.50.82.22.13.13.9
  Fuel Oil and CoalIPD—Fuel Oil and Coal1.6600.44.020.6-3.5-4.4-0.5-1.5-0.611.81.2-8.5-2.40.70.83.04.6
  ElectricityIPD—Electricity1.2101.42.82.33.82.02.00.12.21.70.00.40.81.71.51.72.1
  Natural GasIPD—Natural Gas0.910-0.62.70.11.31.86.21.9-5.14.03.6-2.61.52.11.92.83.9
  Water and Sewage MaintenanceCPI(U)—Water and Sewage0.4905.56.16.77.36.85.45.03.14.13.66.35.85.55.45.25.3
 Food—9.7404.35.24.51.61.21.91.92.14.02.52.42.42.62.82.93.0
  Direct PurchasePPI—Processed Foods4.9304.44.53.50.00.21.61.21.25.01.01.91.82.02.12.22.3
  Contract ServiceCPI(U)—Food and Beverages4.8104.15.85.33.02.02.22.42.83.33.62.72.93.13.23.43.4
 All Other—15.3704.95.65.95.14.03.73.13.23.12.93.23.43.63.73.83.9
  PharmaceuticalsPPI—Prescription Drugs1.5007.99.18.98.46.54.53.22.83.32.63.13.74.14.34.44.6
  SuppliesCPI(U)—All Items3.2804.14.85.44.23.03.02.62.82.92.62.73.03.23.43.53.6
  Health ServicesCPI(U)—Physicians' Services1.2107.27.37.26.06.35.64.44.53.63.64.14.34.44.54.54.5
  Other Business ServicesCPI(U)—Services4.5904.54.95.34.83.83.83.33.43.33.13.53.63.73.93.93.9
  Miscellaneous CostsCPI(U)—All Items4.7904.14.85.44.23.03.02.62.82.92.62.73.03.23.43.53.6

For data sources used to estimate the input price index relative weights and choice of price proxies, see the October 7, 1992, Federal Register.

Category weights may not sum to total because of rounding.

NOTES: A dash (—) in the Price/Wage Variable column denotes a total or subtotal produced by adding 2 or more categories.

AHE represents Average Hourly Earnings, BEA represents Bureau of Economic Analysis, IPD represents Implicit Price Deflator from the Department of Commerce, CPI(U) represents Consumer Price Index for all urban consumers, and PPI represents Producer Price Index. CY is calendar year. Q designates quarter of year. An example of how a percent change is calculated is shown in the Notes at the end of Table 10.

SOURCES: Health Care Financing Administration, Office of the Actuary: Data from the Office of National Health Statistics, Division of Health Cost Analysis. First quarter 1997 forecasts were produced under contract to HCFA by Data Resources, Inc/McGraw-Hill.

Medicare Economic Index

In 1972, Congress mandated the development of the MEI to measure the changes in costs of physicians' time and operating expenses. The input price change measured by the MEI is considered in connection with the update factor for the Medicare Part B physician fee schedule under the Resource-Based Relative Value Scale (RBRVS) (November 22, 1996, Federal Register), or is used as an advisory indicator by Congress in updating the fee schedule. The MEI is a fixed-weighted sum of annual price changes for various inputs needed to produce physicians' services with an offset for productivity increases. Like a traditional Laspeyres index, the MEI is constructed in two steps. First, a base period is selected (1989 for the MEI), cost categories are identified, and the 1989 expenditure shares by cost category are determined. Second, price proxies are selected to match each relative expenditure category. These proxies are weighted by the category weight determined from expenditure amounts, and summed to produce the composite MEI. Unlike a traditional Laspeyres index, the compensation portion of the MEI is adjusted for productivity so both economy-wide productivity and physician practice productivity are not both included in the update, resulting in a double counting of productivity. Forecasts of the MEI are made periodically throughout the fiscal year by DRI/McGraw-Hill for HCFA using several different sets of economic assumptions. DRI/McGraw-Hill produces four main forecasts of the MEI: a Presidential budget forecast in December and the mid-session review in June based on assumptions for the Federal budget exercises, the Medicare Trustees Report forecast in February based on assumptions by the Medicare Trustees, and the Medicare Premium Promulgation forecast in August based on baseline assumptions by DRI/McGraw-Hill. DRI/McGraw-Hill also produces forecasts of the MEI using their own economic assumptions forecast. The forecasts based on DRI/McGraw-Hill assumptions are presented in Health Care Indicators. Much of the forecasted data change as more recent historical data become available and the assumptions change. The methodology, weights, and price proxy definitions used in the MEI are described in the November 25, 1992, Federal Register. The MEI data are presented in Table 13 as index levels and 4-quarter moving average percent changes.
  5 in total

1.  Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 1997 rates--HCFA. Final rule.

Authors: 
Journal:  Fed Regist       Date:  1996-08-30

2.  Medicare program: schedule of limits for skilled nursing facility inpatient routine service costs--HCFA. Final notice with comment period.

Authors: 
Journal:  Fed Regist       Date:  1994-01-06

3.  Medicare program; revision of the Medicare Economic Index--HCFA. Final rule.

Authors: 
Journal:  Fed Regist       Date:  1992-11-25

4.  National health expenditures, 1994.

Authors:  K R Levit; H C Lazenby; L Sivarajan; M W Stewart; B R Braden; C A Cowan; C S Donham; A M Long; P A McDonnell; A L Sensenig; J M Stiller; D K Won
Journal:  Health Care Financ Rev       Date:  1996

5.  National health expenditures, 1995.

Authors:  K R Levit; H C Lazenby; B R Braden; C A Cowan; P A McDonnell; L Sivarajan; J M Stiller; D K Won; C S Donham; A M Long; M W Stewart
Journal:  Health Care Financ Rev       Date:  1996
  5 in total
  1 in total

1.  National health expenditures, 1996.

Authors:  K R Levit; H C Lazenby; B R Braden; C A Cowan; A L Sensenig; P A McDonnell; J M Stiller; D K Won; A B Martin; M L Sivarajan; C S Donham; A M Long; M W Stewart
Journal:  Health Care Financ Rev       Date:  1997
  1 in total

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