Healthcare costs are primed to surge soon, like other living costs have in recent months, due to the delayed effects of inflation.
The higher prices associated with labor, materials and other goods that have contributed to record-high inflation while squeezing middle-class America haven’t trickled into the healthcare sector yet. Prices set by Medicare and insurers are decided months in advance, so current rates don’t account for the full impact of inflation that has reached over 9%.
Hospitals, nursing homes and other healthcare facilities have struggled to deal with the price pressure from rising costs without being able to raise rates, according to Politico. But that problem is likely to be alleviated soon, when providers will be able to pass on inflationary costs to consumers.
One month of 0% inflation doesn’t cancel out the past two years of nearly 10% inflation. 📈
Americans are hurting from rising prices, and they don’t want to be gaslit into thinking everything is fine. https://t.co/XQE2YC8Y4r
— Frank Luntz (@FrankLuntz) August 11, 2022
Medicare projected that hospital costs would increase by 2.7% for the current fiscal year. Instead costs are expected to rise more than 5%, almost twice as much, according to Politico. As a result, inflation of medical costs for consumers hasn’t matched other industries.
Energy, food and vehicle prices have all seen double-digit percentage increases, but consumer medical costs are only up 5.1%, according to Politico. Medical care commodities have seen even slower increases, at just 3.7% in the past year. Inflationary effects on medical costs can have a lag of at least 10 months. (RELATED: Inflation Rages On As Gas, Food Prices Squeeze Americans)
The inability to charge higher prices to meet higher labor and material costs has driven some healthcare facilities to cut back on the care they can offer, or close entirely, according to Politico. Moreover, the period of discounted medical care is likely to come to an end soon. The Center for Medicare and Medicaid Services released new payment rules this month, which project a cost increase of 4.1% next year — a change likely to be reflected in consumer costs sooner rather than later.
Democrats have taken steps to try to reduce prescription drug costs in the reconciliation package likely to hit President Joe Biden’s desk soon. But the Congressional Budget Office projects that the policy could lead to higher drug prices in the short term, not lower ones.