CPI has never adequately captured the rate of change in health care services costs - by design. If health care costs were presented monthly, like energy, everyone one would be able to see clearly what happens to an industry when too many government dollars chase a fixed amount of capacity and output. Policies that warm the cockles of politicians' hearts would get nowhere.
Instead health care is arguably underweighted in CPI. Moreover, CPI only considers the price to the consumer which, fellow denizens of wonk-land know, is determined less by the price of goods and services than by the number agreed to by the insured and the insurance company. In times of rapid rise inflation, those agreements become outdated quickly, as is the case now.
Inflation in health care, then, needs to express itself in other ways. One way is elevated acuity - real and imagined. Another is careful control of case flow and diversion to lower cost care settings. The latter approach can have lots of downsides for patients, of course. But, as a health executive told me last week, "you can only do what you can do" which sounds a little like Dick Cheney's known unknowns but I think the point is still a good one.
Have a great day.
Emily Evans
Managing Director – Health Policy
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