Health care prices sheltered from inflation so far, BLS data shows


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Health care prices have been rising over the past year, and generally health care prices and overall health care spending are outpacing growth in the rest of the economy. But according to a Health System Tracker analysis of data from the Bureau of Labor Statistics, increases in health care prices over the past year are well below the rate of inflation, which is at its highest level in four decades.

This means that the healthcare sector has been shielded from some of the worst effects of inflation. The analysis used BLS data, including the consumer price index (CPI) and producer price index (PPI), to analyze the prices of medical care relative to other goods and current services.

In July 2022, overall prices increased by 8.5% compared to the previous year, while prices for medical care only increased by 4.8%. Although this is a typical trend reversal, the relatively high rate of inflation seen in the rest of the economy could eventually translate into higher prices for medical care, according to the analysis. This could lead to larger premium increases in years to come.


Since 2000, the price of medical care, including that of the services provided, insurance, drugs and medical equipment, has risen faster than prices in the economy as a whole. Prices for medical care have increased by 110.3% since 2000, while prices for all consumer goods and services have increased by 71% over the same period.

Yet while medical care costs have risen faster, they have also risen more consistently year over year than prices in the broader economy, which can be more volatile, especially for food and energy. Between 2001 and 2020, prices for medical care increased between 1% and 5% each year. Overall prices have seen greater volatility, although they have generally risen at a slower pace than medical care prices until recently.

In July 2022, however, prices increased by 8.5% in the whole economy compared to the previous year, against a growth of 4.8% in prices for medical care.

Overall price growth stood at 8.5% and underlying inflation (excluding food and energy) at 5.9%. Many essential goods and services saw larger increases. Food prices increased by 10.9% and electricity costs by 15.2%. Many other household expenses, such as rent and clothing, have also seen larger price increases over the past year than medical care. By far the fastest growing essential household expenditure is gasoline, the price of which has risen 44% since July 2021.

Prices for hospital services, both for inpatients (3.9%) and outpatients (3.5%), as well as for nursing homes (4.5%), rose faster, while drugs and medical services saw lower price increases (2.8% and 0.8%, respectively). ). Rising average employee salaries and continued staff shortages as a result of the pandemic could put upward pressure on operating costs.

The CPI for medical care also includes the price indices for medical equipment (6.6% in July compared to the previous year) and the administrative costs and benefits of health insurance (20.6%). The CPI for health insurance is lagged by almost a year and does not represent current changes in health insurance costs. Healthcare utilization declined in 2020 due to COVID-19, which subsequently led to higher margins for insurers.


Another measure of inflation, the Producer Price Index (PPI), represents inflation from the perspective of producers in the public and private sectors. The PPI for health services includes medical services that are paid for by third parties such as employers or the federal government.

The PPI takes into account variations in industry production costs by focusing on actual transaction prices. The CPI, on the other hand, assumes that consumers buy a similar set of goods and services and does not take into account the trade-offs that consumers may make in response to price changes.

Since June 2009, the CPI-U for medical services has increased by 51%, while the PPI for health services has increased by 32%.

Generally, the prices paid by private insurers are higher and increase more rapidly than the prices paid by public payers. PPI private insurance health services have increased by 21.4% since June 2014, compared to 12.2% for Medicare and 12.8% for Medicaid during the same period. The overall health services PPI has increased by 17.8% since June 2014.

The year-over-year health services PPI has increased in recent months for private insurance, with 4.1% in July 2022 compared to the same month in 2021, compared to a decline of 0.6% for Medicare and a 3.4% increase for Medicaid.

During the public health emergency, Medicare provider reimbursement for COVID-19 treatment is being increased by 20%, which is at least part of the reason for Medicare’s 2020 PPI increase.


Inflation is one of the factors expected to impact premiums in 2023, with the lingering effects of COVID-19 and the end of enhanced subsidies for stock-exchange plans, according to a July report from the American Academy. of Actuaries.

A subsequent eHealth survey of approximately 2,500 beneficiaries found that 95% of Medicare beneficiaries are concerned about the impact of inflation on healthcare costs, and nearly half say that their healthcare costs have already increased due to inflation.

People on fixed incomes are particularly vulnerable to the impact of inflation on costs, according to the analysis, the consequences of which are felt almost immediately.

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