- Medical cost growth trailed that of other industries in 2021, though rising pressure from the omicron variant could fuel future increases in healthcare costs.
- Prices for goods and services skyrocketed at the fastest pace in four decades, rising 7% between December 2020 and December 2021, according to new data released Wednesday from the Bureau of Labor Statistics.
- By comparison, prices for healthcare services rose roughly 2.5% last year, while the cost of medical care goods rose just 0.4%. However, that slow rate of growth could accelerate as COVID-19 cases persist in 2022 and beyond.
Inflation fell slightly at the beginning of the pandemic two years ago, though healthcare prices rose slightly as regulators and lawmakers bolstered the nation's medical system, girding it against COVID-19 through measures like increasing the government's match rate for Medicaid.
But 2021 was the worst year for inflation since 1982, BLS found. Prices rose sharply for cars, gas and food as high consumer demand met overtaxed supply chains.
In an attempt to tamp down on concerns about the nation's economic health, President Joe Biden pointed to the fact that Americans paid 0.5% more for goods and services in December, down from 0.8% growth in November. That month-to-month slowing in price growth shows progress in slowing the rate of inflation, Biden said.
"We are making progress in slowing the rate of price increases. At the same time, this report underscores that we still have more work to do," Biden said in a Wednesday statement on the BLS numbers. White House economic adviser Brian Deese said in a Wednesday press briefing most forecasters expect overall prices to moderate over the course of this year.
Yet even as prices in other industries climbed, cost growth for medical services was relatively modest in 2021, even as the coronavirus grew in intensity.
That was reflected on a month-to-month basis as well — the medical care index rose just 0.3% in December compared to November, driven by a small bump in prices for hospital services and prescription drugs. The index for physician services was unchanged, BLS said.
Healthcare prices traditionally see less fluctuation than those of other industries because health insurers and other payer organizations generally lock in prices for the year in advance. Network contracts from private payers can only be renegotiated on a periodic basis, while government programs like Medicare fix reimbursements for the plan year.
But the highly infectious omicron variant is adding more stress onto the system, which could contribute to higher medical prices in 2022 and in the long term, even if consumer price index growth slows.
Those pressures include higher labor costs as hospitals and other providers compete for workers in a tight labor market, and supply chain problems that continue driving up prices for needed supplies.
Those costs will likely trickle down to consumers in the form of higher out-of-pocket spending.