Health Care Inflation and the Federal Budget

Reposted from 08-16-13 Wells Fargo Securities Special Commentary
Authors: Jay H. Bryson, Global Economist and Michael A. Brown, Economist

Not only has the overall rate of consumer price inflation declined over the past few years, a fact that is widely known, but the rate of medical care inflation has also dropped markedly, which may not be as well appreciated by the public. Indeed, the rate of medical care inflation at present is roughly 1 percent, which is essentially the same as the overall rate of consumer price inflation.

Although precise estimates vary, there is general agreement that cyclical factors have played at least some role in depressing medical care inflation. Therefore, health care prices will likely accelerate somewhat over the next few years, as economic growth strengthens. With medical care products and services accounting for about 7 percent of the total consumer expenditures, acceleration in the prices of these goods and services, should it occur, would put some modest upward pressure on overall CPI inflation…MORE

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