Recent news reports have excitedly announced that healthcare inflation seems to be under control. In 2012, for example the cost of health insurance premiums rose only 4% for a typical American family, a paltry figure compared to the almost 10% annual increases experienced a decade or so ago. But just how good is this good news?
Look at the figure below, in which I map annual increase in healthcare costs as well as general inflation rates in the US economy. As you can see, healthcare costs are still rising faster than inflation. In fact in 2012, the year everyone seems to be celebrating as an example of health care cost containment, healthcare costs rose almost 4%, while the consumer price index rose approximately 2%. For those, like me, who are not professional mathematicians, that means healthcare costs rose almost twice as fast as the average consumer good.
This picture shows some very good news. The red line and the green line are getting much closer together, it seems, than they used to be – with the exception of 2009 when we experienced deflation in our economy. But we are far from taming the beast of healthcare inflation… (Read more and view comments at Forbes)