3 Stories to Report on Health Care Inflation

by April 5, 2018
The AMA is the latest group to give the Republican's new health care plan a thumb's down. (Image from "stevepb" via Pixabay, CCO Public Domain)

It’s a good time for business reporters to help their readers prepare for sticker shock by looking at the surge in health care inflation. (Image from “stevepb” via Pixabay, CCO Public Domain)

The overall rate of inflation for all goods and services in the Consumer Price Index (CPI) is projected at 2.6% in 2018, an increase that economists describe as “modest.” But your readers won’t be using that word to describe the next increase they see when they pay for an out-of-pocket charge or hospital bill.

Business reporters can help their readers prepare for sticker shock by looking at the surge in health care inflation, which is on track to double at twice the rate of inflation projected in 2018, by looking into one or more of these angles:

Why is health care inflation on the rise?

For nearly 20 years, medical care has been growing about 70% faster than the cost of overall goods and services, but the impact of rising health care costs has only recently hit the headlines. A July 2017 blog from FRED, the Federal Reserve Bank of St. Louis, charted the trend, which has been hiding in plain sight due to what FRED calls a “regime” of stable inflation. That changes radically in 2018, when the average annual rate of medical care is expected to increase nearly 50%, to 5.3% from 3.6% — nearly twice the rate of inflation of 2.2% projected for overall goods and services. In fact, from 2017-2026, the growth in national health spending is projected to rise faster than the Gross Domestic Product (GDP) and push up the health share of GDP will increase from 17.9% to 19.7% .

Are prices at local health facilities following the national trend?

Look at the health facilities in your coverage area, including profit and nonprofit hospitals and urgent care centers. Interview business managers about the rise in hospital pricing. The 4.7% increase recorded in 2017 is “unsustainable,” says health systems organization Altarum based in Ann Arbor, Mich. Do some local facilities expect to raise their prices higher or lower this year, and why? Ask managers to explain the strategies they already have in place, or are considering, for 2018.

How can readers prepare for health care inflation in 2018?

The answer is simple — just not easy: Plan for it. While your readers are sitting down to do their taxes this month, focus their attention on health care costs. How much more did they pay in 2017 for medical care, including premiums, out-of-pocket costs (deductibles and prescriptions) and deductibles. Explain why putting that number into their budget this year — plus at least another 5%, to cover the increase in medical costs this year makes sense to do — this year and every year. Interview a few financial experts who can help, including a Certified Financial Planner and financial adviser, to develop your story.