Continued acceleration in medical care inflation

For the fourth year in a row, the rate of medical care inflation was higher than in the preceding year. The consumer price index for medical care rose 4.7 percent in 2001, the highest calendar-year increase since 1994.

[Chart data—TXT]

Higher price increases for inpatient hospital services and for prescription drugs offset lower price increases for services by physicians, dentists, outpatient hospitals, and nursing homes.

Hospital services charges increased 7.2 percent, following a 6.3-percent rise during the prior year. A main factor behind last year’s high increase in hospital services charges is higher labor costs for nurses. Increases in nursing charges have accelerated in recent years due to a growing shortage of nurses. Additionally, restrictions of allowable charges and reductions in some Medicare and Medicaid reimbursements have led many hospitals to attempt to compensate by increasing fees to private-pay patients.

The index for prescription drugs and medical supplies increased 6.0 percent in 2001, compared with 3.6 percent in 2000. In recent years, there has been a large increase in demand for prescription drugs, in part due to increased advertising aimed directly to consumers by pharmaceutical companies.

These data are produced by the BLS Consumer Price Index program. Annual percent changes are December-to-December changes. Details on the calculation of the medical care CPI are in Measuring Price Change for Medical Care in the CPI. For additional information on consumer price changes in 2001, see "Consumer inflation lower in 2001: energy and apparel prices declined," by Todd Wilson, Monthly Labor Review, March 2002.