US Health Care Costs Exceeding Inflation

Medical costs in the USA have started to move ahead of the rate ofinflation, after three years below that line, and could be on the verge of a sharp rise. Employers have said their health care costs are likely to show an average 4% increase this year, up from 2.5% last year, according to a survey released by the Foster Higgins benefits consulting firm. Some other health care experts are predicting 5%-10% growth in medical costs in 1998.

The same underlying forces that drove up costs in the 1980s are still powerful, according to a report in the New York Times, which notes that these include more expensive medical technologies as well as new drug combinations. Costs might also be boosted slightly by new laws prohibiting some cost-cutting moves such as limiting hospital stays after childbirth.

Factors Driving Price Higher Hospitals and doctors have also boosted their ability to ask for higher fees by forming alliances and merging into bigger entities, the NYT said. Additional factors driving up prices include sagging profits at managed care companies, industry consolidation and an aging workforce. US Labor Department data shows consumers' medical costs rose 3% last year while the overall Consumer Price Index was up 3.3%.