Better Solutions for Healthcare

Bloomberg: A Long Era of Low Health Care Inflation May Be Coming to End

A Long Era of Low Health Care Inflation May Be Coming to End
By John Tozzi
February 12, 2018

Since the late 2000s Great Recession, historically low increases in health-care prices have helped hold down inflation. That may be about to change.

Hospital prices increased 2.2 percent in December, the fastest rate in four years, according to an analysis by Altarum, a nonprofit health-care research organization. The group analyzes data from the Bureau of Labor Statistics and other sources to estimate the underlying prices that health plans and consumers pay for medical goods and services.

While overall medical inflation was restrained last year, the report warns that “we could very well be at the cusp” of a return to a more typical pattern where increases in health-care prices outpace the broader inflation rate.

“We have lots and lots of experience where health-care prices grow more quickly than economy-wide prices,” said Paul Hughes-Cromwick, co-director of sustainable health spending strategies at Altarum. The reversal in recent years “is not normal,” he said, and he doesn’t expect it to last.

In recent days, financial markets have become more concerned about the potential for a faster-than-expected increase in prices throughout the economy. A report showing strong wage gains by U.S. workers last month helped briefly push stocks into a correction, a retreat of more than 10 percent from their recent peak.

Rising prescription-drug prices have made headlines, but drugs account for only 10 percent of total health spending in the U.S. The bulk of outlays goes to hospitals, doctors, and other professional services. Price increases in those sectors have been restrained, partly because of limits on how much Medicare pays hospitals and physicians under the Affordable Care Act and other legislation.

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