As I have noted, we are only at the front end of health care’s impact on inflation. The Altarum Institute tracks health spending and prices. This brief notes on sharp divergence of government and private health care prices in the last few months. That won’t last. As the brief explains, currently the federal government has taken a bite out of Medicare prices paid to hospitals and physicians, lowering those prices, but the political reality is that those groups are going to lobby for substantial price increases in the next few months. Meanwhile, the private sector is seeing prices heat up, by 1% alone in July compared to June and over 5% from January 2021 til July of this year.
That 1% month over month increase is going to look puny when we see January of 2023 compared to December of 2022, because January is when the new contract year kicks in for most private plan agreements with providers. Hospitals have substantial market power and they have obtained 1% month over month price increases for the last three months. By my basic math, that is running at a 12% annual rate. Physician price increases are lagging, but they won’t be far behind. This is 20% of the economy. Those price increase mean higher premium contributions and higher cost-sharing amounts for the average worker. Brutal. And the other thing that is happening is that the private sector is increasingly subsidizing those public programs as the difference in reimbursement grows wider and wider. (Altarum Brief)