Health care inflation remains low as other services continue to spike
If filling up your tank or getting your groceries in 2023 were any indication, the dollar hasn't been stretching as far as it used to. Since 2000, prices for consumer goods and services in the U.S. have risen by just over 80%—however, medical prices have increased by nearly 115%.
It's no secret health care in the United States is among the costliest in the world, but there's some good news: Bureau of Labor Statistics Consumer Price Index data released in October 2023 reported that prices for consumer goods and services rose 6% from February 2022 to February 2023, while the cost of medical services grew just 2.1% over the same period.
Health insurance costs fell from a peak in September 2022 by about 3% to 4% a month, mirroring a decrease in insurers' profits when people began using health services again. There had been a steep drop in 2020 when medical practices were largely closed, but insurers pocketed premiums all the same.
The major events of the past few years, like the COVID-19 pandemic and worsening geopolitical conflicts, played a large part in overall inflation in 2023.
Vivian Health used data from the Bureau of Labor Statistics, news coverage, and research studies to analyze health care costs year-over-year and the ways that health care inflation differs from other consumer goods and services.
Measuring inflation isn't always straightforward
Complications in the supply chain for items like semiconductors were profound during the height of the pandemic. Car manufacturing paused when automakers couldn't get their hands on chips that provide key features due to factory or logistics closures and increased demand for computers to service the swift shift to remote working. The Russia-Ukraine war also put additional pressure on the global energy market and food costs, which reverberated throughout the U.S. economy.
More recently, price increases for gasoline and cars have slowed. But even when the market cools off, health care inflation rates tend to remain elevated and continue to rise incrementally, according to a Money interview with HealthView Services CEO Ron Mastrogiovanni.
Health insurance costs are expected to bounce back up and have begun rising 1% each month since October 2023, according to a CNBC interview with Mark Zandi, chief economist at Moody's Analytics.
The way economists measure inflation, though, depends on how they slice it. The CPI's measurement of health insurance inflation, in particular, isn't an exact science. It only shows a picture of how prices for consumers change.
For instance, since health insurers don't provide health plans of equal quality, the BLS measures health insurance inflation using health insurers' profits instead of trying to weigh the benefits and risk factors that vary across policies. Also, Medicaid and workers' compensation payments aren't factored into the CPI, since consumers don't need to pay out-of-pocket to participate.
Measuring inflation for other costs, such as those included in the Personal Consumption Expenditures price index, is more straightforward. It involves examining how much consumers, their employers, and the government pay for specific goods and services.
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