Overall inflation in the United States peaked in mid-2022, compared to the previous year consumer price index (CPI) increased by only three percent in June 2023. During the same period, the costs of
, and medical equipment, have risen faster than other costs in the overall economy. In 2022, this trend reversed and for the first time in over three decades, the overall inflation rate increased at a faster rate than medical care costs. For how long this trend will continue remains to be seen. In October 2023, the Bureau of Labor Statistics (BLS) reported a
. The BLS health insurance index measures the profits of insurers after paying for medical services, this is the main reason why the decline in the health insurance index is not reflected in the actual premium paid by Americans.
Producer price index
Even though the healthcare system has remained resilient to the record-high inflation in the U.S., it may not continue to stay this way in the near future. Apart from CPI, another measure for inflation is the producer price index (PPI) which represents inflation from the viewpoint of industry and business. PPI considers changes in the output cost of services of domestic producers with a focus on the actual transaction prices. Prices for
medical services are typically predetermined, either administratively for government programs like
Medicare and Medicaid or through agreements between providers and insurers, many of which are calendar-year-bound. A recent KFF analysis reports that since July 2014 the overall
health services PPI increased by 20.5 percent.
Inflation impact on insurance
Currently, the rising healthcare input costs are absorbed by the providers, it is only a matter of time until it filters down to the payers, who will eventually pass down the cost increases to employers and private consumers. Healthcare industry specialists, economists, and business leaders predict that health coverage and
out-of-pocket medical costs are going to soar due to the wage, revenue, and supply chain constraints that battered hospital and clinic margins during the pandemic. Some 40 million Americans have some form of
ACA-related health insurance. According to a KFF survey of ACA marketplaces, insurers anticipate a median increase of six percent in
health insurance premiums in 2024. After years of stable premium rates, due to the inflation many Americans will experience a moderate increase in their premiums beginning next year.
Inflation impact on consumers
The volatile economic environment is changing
how Americans prioritize healthcare over other needs. Recent consumer surveys reflect the change in the attitude of Americans toward healthcare utilization and consumption of healthcare services due to cost concerns. Consumers are more likely to have
unmet healthcare needs, and have higher
medical debt due to inflation. The government has recently introduced the Inflation Reduction Act (IRA) to soften the blow of inflation on millions of Americans. IRA healthcare provisions aim to lower out-of-pocket drug expenses for people with Medicare and cap Medicaid prescription drug spending. Since most Americans receive subsidies, hikes in insurance premiums are most likely to result in increased federal spending on subsidies.
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