The Cost of Medical Care

It looks like Bush is going to spend a fair bit of his State of the Union address talking about rising health care costs. I’ve argued for a long time (yes, I realize that I’m not the only one) that health care is probably the biggest domestic problem that the US will face over the medium and long term.

Here at Angry Bear we’ve devoted a fair amount of time discussing the topic of health care (see the posts under “The US Health Care System” at left for some examples). But those posts focus more on the performance of the US health care system than on how medical costs affect individual households. So over the next week or two I’ll be putting up some data illustrating how health care costs and burdens on individuals have changed over the past couple of decades.

Today I’ll start with one simple measure of the rise in health care costs: the CPI measure of the price of medical care, from the BLS. The following chart shows the annual inflation rate in medical care, compared to all other items that consumers buy.

Note that this indicator of health care inflation measures the prices of out-of-pocket medical expenses, including insurance premia that individuals pay. (For details about the CPI data on medical care inflation, see this publication.) In other words, it does not measure inflation in health insurance coverage provided by employers.

Part of what I hope to do over the next week is explore some of the implications for households of the fact that health insurance is frequently provided by employers in the US. Be prepared to be a bit depressed.