Healthcare costs contributing to U.S. inflation, rise 0.3 percent

Healthcare costs are fueling a rise in the rate of inflation that is expected to accelerate this year; increasing rents are also helping to drive this trend, according to Reuters.

Overall, the costs of medical care increased by 0.3 percent last month, while prescription drug prices jumped 1 percent after a 0.6 percent rise late last year. Hospital and doctor visits both saw their costs increase by 0.3 percent, and economists estimated that the core index for personal consumption expenditures rose about 0.2 percent in December, after a 0.1 percent gain in November.

The data on healthcare, along with statistics showing rising rents and retail sales, have economists predicting that the Federal Reserve will stay on course to increase interest rates in March. The U.S. central bank expects three rate increases this year; it raised borrowing costs three times in 2017.

While costs often reflect demand, rising healthcare costs have been an issue for the industry in general, with some experts claiming it makes it more difficult for doctors to provide quality care.

That trend may be slowing, however. In 2017, PricewaterhouseCoopers' research firm, Health Research Institute, predicted there will likely be a 6.5 percent growth rate this year, only half a percentage point higher than in 2017. And after anticipated changes in benefit plan design, such as changes to copays and network size, the net growth rate is expected to be one percentage point lower, at 5.5 percent.

This reflects what HRI calls a "new normal," a continuation of medical cost trends hovering in the single digits and fluctuating only slightly, with huge cost spikes appearing unlikely for the foreseeable future.

The Fed has a 2 percent target for inflation this year, and economists hope commodity prices, a tightening labor market and a weak dollar will lift inflation to that target.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com