Healthcare inflation stays low amidst other service spikes
TL/DR –
Since 2000, prices for consumer goods and services in the U.S. have risen by over 80%, with medical prices increasing by nearly 115%. However, between February 2022 and February 2023, the cost of medical services grew by just 2.1%, and health insurance costs fell from a peak in September 2022 by about 3% to 4% a month. Factors such as the COVID-19 pandemic and geopolitical conflicts have played a significant role in overall inflation, and the ways economists measure inflation can vary depending on the sector, including health insurance inflation which uses insurers’ profits as a measure.
Fear of Inflation: Are Your Dollars Stretching Less in 2023?
If rising costs of fuel and groceries are anything to go by in 2023, the dollar’s value seems to be decreasing. Since 2000, consumer goods and services prices have surged over 80%, and medical prices have skyrocketed by about 115%.
While the US is known for its exorbitant health care costs, the recent Bureau of Labor Statistics data shows a bit of relief. From February 2022 to February 2023, consumer goods and services rose 6%, while medical services increased by a simpler 2.1%.
Interestingly, health insurance costs dropped roughly 3% to 4% monthly since September 2022, reflecting insurers’ profit decrease when health services use resumed.
What’s Fuelling Overall Inflation in 2023?
Significant events like the COVID-19 pandemic and escalated geopolitical conflicts have played a role in 2023’s overall inflation. Vivian Health analyzed health care costs and inflation differences using data from the Bureau of Labor Statistics, various news, and research studies.
Understanding Inflation: It’s Not As Simple As It Appears
During the pandemic peak, factors like supply chain complications contributed to inflation. The Russia-Ukraine war further strained the global energy market and food costs, impacting the US economy. More recently, gasoline and car price increases have slowed.
Still, despite market cooling, health care inflation rates persistently rise, as noted in a Money interview with HealthView Services CEO Ron Mastrogiovanni. Since October 2023, health insurance costs have started to increase by 1% monthly, according to a CNBC interview with Mark Zandi, chief economist at Moody’s Analytics.
However, measuring inflation is not straightforward, especially for health insurance. The CPI’s calculation of health insurance inflation uses insurers’ profits as a measure, rather than considering policy benefits and risk factors. Medicaid and workers’ compensation payments are also excluded from the CPI due to the absence of out-of-pocket expenses for consumers.
In contrast, the Personal Consumption Expenditures price index measures inflation by considering costs borne by consumers, employers, and the government for specific goods and services.
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