Following yesterday’s inflation posts, here’s a decidely non-food, non-energy source of inflation: Health care:

"While growth in health-care spending is slowing, it will still far outpace the economy’s growth over the next 10 years, according to new federal projections.

By 2015, health spending will account for 20% of gross domestic product, up from 16% today. By that year, federal and state governments will be picking up almost half of the health-care tab. Growth in spending over the coming decade is projected to average 7.2% a year.

Rising incomes as well as higher prices for services are driving the trend, according to actuaries and economists at the federal Centers for Medicare and Medicaid Services who compiled the projections. Aging baby boomers, they found, will have a relatively minor, though increasing, effect on health spending in the next decade."

The CMS report was published yesterday in the journal Health Affairs.

I guess this means we need to move health care out of the core, in order to maintain that low core inflation data . . .

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Source:
Health Spending Likely to Outpace Economy’s Growth
SARAH LUECK
WSJ, February 22, 2006; Page A6
http://online.wsj.com/article/SB114057901532579836.html

Health Spending Projections Through 2015: Changes On The Horizon
Christine Borger, Sheila Smith, Christopher Truffer, Sean Keehan, Andrea Sisko, John Poisal, M. Kent Clemens
Health Affairs, February 22, 2006
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.25.w61

Category: Consumer Spending, Inflation

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5 Responses to “Health Spending Likely to Outpace Economy’s Growth”

  1. Dan Weber says:

    I fired off an email to the CME last week talking about a healthcare futures. These were the same guys that did snowfall and weather futures, it would only make sense that they have futures to help solve the biggest problem facing corporate america next to SarbOx…

    Still waiting on a response.

  2. GRL says:

    I think we need dynamic indexing of inflation. As different products and services rise or fall in price, the government can shuttle them in and out of the core inflation index in real time to keep that all-important statistic under 2%.

  3. cm says:

    “in order to maintain that low core inflation data”

    Well, are we being facetious again today. As everybody knows, it’s to track the “underlying” (as opposed to “overflying”) price trends.

    Healthcare expenses will not be removed from CPI, but will be chain-weighted into “healthy stud equivalent medical use”.

  4. Lord says:

    No need to. We will just adjust wages down as we have already been doing.

  5. Lord says:

    Excuse me. I forgot wages aren’t included in the cpi.