Health care prices lag economy-wide inflation
A price spike could come as spending on food, gas, electricity and labor increases.
Health care price increases are lagging economy-wide inflation, which could lead to steeper price increases in the future.
Food, electricity and gas prices hit four-decade highs, but health care price increases in 2022 have not kept pace, according to the study “Headline Inflation has not yet trickled down to the health sector.” The Peterson Center on Healthcare and the KFF publish the Health System Tracker with financial and economic studies on medical care. The inflation report analyzed data from the US Bureau of Labor Statistics, including the Consumer Price Index (CPI) and the Producer Price Index.
Health prices are usually fixed in advance administratively or through private insurance contracts, according to the study, so prices could now be tied to insurance schemes or the calendar year. At least two factors could drive up health care prices in 2023:
Increase in insurance costs. A KFF-Peterson review of 2023 health insurance rates showed that insurance providers in the Affordable Care Act market are planning increases of 10%.
Increase in salaries of health workers. “Rising average employee wages and continued staff shortages as a result of the pandemic could put upward pressure on operating costs,” particularly for hospitals and nursing homes.
In years past, health care prices tended to exceed the costs of other consumer goods and services.
Since 2000, medical prices have increased by 1% to 5% per year, reaching a total growth of 110.3%. At the same time, prices for all goods and services have been more volatile at times, but have generally increased at a slower pace than health care prices. Since 2000, general consumer goods and services have increased by 71%, according to the study.
That changed this year. In July 2022, overall prices increased by 8.5% compared to the previous year, while prices for health care increased by 4.8%. The most dramatic price spike is in gasoline, up 44% year-on-year, while in health care, the consumer price index shows that prices for medical services are not increased by only 0.8% from July 2021 to July 2022.