Healthcare prices lag behind inflation in the overall economy

Price spikes can come when food, gas, electricity and labor costs rise.

Health care price increases have lagged behind inflation in the overall economy, which could lead to higher price increases in the future.

Food, electricity and gas prices have risen to four-decade highs, but in 2022 healthcare price increases have not risen at the same rate, the review said. Headline inflation has yet to flow into the healthcare sector. The Peterson Center on Healthcare and KFF publish the Health System Tracker with financial and economic studies of 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 care prices are generally set administratively or in advance by private insurance contracts, the study says, so prices could now be tied to insurance plans or the calendar year. At least two factors could drive healthcare prices higher for 2023:

Rising insurance costs. A KFF-Peterson review of health insurance rates for 2023 found that Affordable Care Act Marketplace insurance providers expect a 10% increase.

Salary increases for health workers. “Rising average worker wages and ongoing staff shortages in the wake of the pandemic may push up operating costs,” particularly for hospitals and nursing homes.

In recent years, healthcare prices have tended to exceed the costs of other consumer goods and services.

Since 2000, drug prices have increased by 1% to 5% per year, reaching an overall growth rate of 110.3%. At the same time, prices for goods and services overall have been more volatile at times, but have generally risen at a slower rate than healthcare prices. According to the study, general consumer goods and services have increased by 71% since 2000.

That has changed this year. In July 2022, overall prices increased by 8.5% year-on-year, while healthcare prices increased by 4.8%. The most dramatic price increase is seen for petrol with a 44% year-on-year increase, while in healthcare, the consumer price index shows that prices for medical services increased by only 0.8% from July 2021 to July 2022.