Tuesday’s eagerly anticipated inflation report from the Bureau of Labor Statistics had good news for our battered economy – inflation is down for the fifth month in a row. But the counter-intuitive part is that prices for medical care helped lower inflation. I rarely get to report good news on healthcare costs. Of course, there are caveats and disclaimers, but let’s savor this for a moment.
In November, medical care Bureau of Labor Statistics prices were down 0.7% from October. That’s right, I said down. Over the same month, hospital prices dropped 0.3%, eyeglasses were down 2.5% and, prescription drug prices were down 0.2%. Prices for physician services didn’t change. In comparison, prices for all items across the entire economy rose 0.1%. Annually, medical prices rose 4.4% compared with 7.1% for the entire economy.
In bad news, housing costs are still increasing too fast, accounting for half of total inflation. Food prices are also rising, especially fresh fruit and vegetables. Food and housing are basic needs and critical to health and well-being. Apples, bananas, and lettuce are to blame. But sugar and sweets are down – making for a bit merrier holiday season.
Prices for hospital and related services decreased 0.3 percent over the month, and prescription drugs declined 0.2 percent. Prices for physicians’ services was unchanged in November.
Now for the ugly reality check. Don’t start spending the money yet.
This is weird. Since 2000, medical care prices have risen by 110% while all items rose by 71.3%. The underlying structure of the markets haven’t changed. Healthcare will soon overwhelm the economy again. In some respects, the rest of the economy is making healthcare look good. Medical prices are still rising by 4.4%, but the rest of the economy is temporarily above that.
Experts saw this coming. All the care we delayed during COVID lowered spending. Because medical prices are locked in by annual contracts, they lag other price increases. Many of us increased bad habits during the pandemic including smoking, drinking, and less exercise. In other gifts from COVID – demand for mental health and substance use care is up sharply and healthcare is now facing an extreme labor shortage. These will all drive up prices in new contracts. Insurers are anticipating this in their extreme rate increases for 2023.
So, enjoy the brief respite. And buckle up for 2023.