The Falling Cost of Health Care

Consumer inflation, as reported by the Labor Department, came in very low in the latest report yesterday – an increase of just 1.4 percent over the past 12 months. But maybe the most interesting aspect of that report was what’s been happening to health care costs. The price index for medical care — a figure that includes products, such as drugs and supplies, and services, such as doctor and hospital visits — fell 0.1% in May. The largest factor was a drop in prescription drug prices of 0.6 percent.

That is highly unusual, to say the least. Incredibly enough, the last time the medical costs index dropped for even a single month was way back in 1975, or nearly 40 years ago. 

Over the longer term, medical costs rose by 2.2 percent over the past 12 months, which slightly outpaced the overall inflation figure. Even so, that’s the lowest annual medical inflation we’ve seen since the 1970s.