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Medical Inflation is Real

By May 31, 2023Commentary

The official US inflation statistics have an extremely goofy method of looking at health care prices.  The reality is that these prices are increasing rapidly and are a major source of higher health care spending.  Milliman is a large actuarial firm and it publishes an index on what a typical family of four with a PPO plan spends for health care every year.  The current release is out and the firm projects that from 2022 to 2023 this cost will rise 5.6%, to $31,065.  Much of the cost is paid by employers, but consumers pick up a large share, almost 40%, between premium contributions and out-of-pocket payments.  The increase is larger than personal income or GDP growth, and will contribute significantly to continued high general inflation.  Health care providers are under labor cost pressures and supply chain issues of their own, which lead them to demand higher prices.  About half of all health care expenses are for inpatient and outpatient hospital services and most hospitals are in large health systems with extensive market power, limiting competition that might force prices down.  And of course drug prices continue to rise rapidly, and account for over 20% of all spending at this point.  (Milliman Report)

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