How does medical inflation compare to inflation in the rest of the economy?

Historically, medical care prices and overall health spending have grown faster than the rest of the economy, increasing their share of the gross domestic product. However, since 2021, overall inflation has surged, outpacing the growth of medical care prices. By March 2024, while the Consumer Price Index (CPI) showed an overall price increase of 3.5% from the previous year, medical care prices rose only by 2.2%, a notable shift from historical trends. This brief examines medical care prices using various inflation measures, highlighting the factors and trends influencing current and future health care costs. Click here for article.

1. Current Trends: In March 2024, overall prices grew by 3.5% from the previous year, but medical care prices increased by only 2.2%, marking a significant deviation from historical patterns where health care costs typically rose faster than general inflation.

2. Historical Comparison: Since 2000, medical care prices have increased by 119.2%, compared to an 85.0% rise in prices for all consumer goods and services. This highlights the long-term trend of medical care costs outpacing general inflation.

3. Inflation Measures: Different inflation measures provide varied perspectives on medical price growth. The CPI focuses on consumer out-of-pocket expenses, while the Personal Consumption Expenditures (PCE) price index includes prices paid on behalf of consumers, and the Producer Price Index (PPI) reflects prices from producers' perspectives.

4. Private vs. Public Insurance: Prices paid by private insurance tend to be higher and grow faster than those paid by public programs like Medicare and Medicaid. Since June 2014, the health services PPI has risen by 28.1% for private insurance, compared to 15.4% for Medicare and 24.7% for Medicaid.