Labor, of course, is the biggest expense for health care. After that, pharmaceuticals and supplies are the next largest categories. For most of the last decade inflation has been very tame for these key ingredients, due in part to off-shoring.
No more.
In January, PPI took off for the Medical Supplies. YoY% change is double to triple the decade-long average of 1-2%. PPI for Surgical Instruments began its ascent in late 4Q and is now above the normal range of 0.0 %-1.0 % YoY change at 2%. The exception to the Surgical Instruments trend was the post-ACA implementation period of 2015-16 when scheduled care like joint replacements was deferred until insurance coverage became more widely available.
The PPI increase for Surgical Instruments is probably signaling a similar setup and a welcome sign for a return to normal operations, albeit with more expensive staff and supplies, but with an ability to cover some or all of those costs with COVID-19 testing, MS-DRG add-ons for patients testing positive.
Inflation for lab instruments and in vitro substance manufacturing are also elevated. Complete inflation chartbook here.
Have a great day.
Emily Evans
Managing Director – Health Policy
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