One Of The Most Encouraging Trends In Health Care May Be Turning

Inflation is
low in the U.S.
And much of this trend is due to the rapid cooling of medical care and medical products price inflation, which has seen structural changes like improved hospital efficiencies, increased use of generic drugs, and declining hospital readmission rates.

However, this brief era of decelerating medical cost inflation may be ending.

“From June to September, the 3-month annualized rate of change for medical goods inflation has jumped from -0.4% to +4.8%, health care services have risen from -0.5% to +1.3%, and financial services inflation has bounced from +0.2% to +2.6%,” noted UBS’s Drew Matus.

Matus sees core price inflation accelerating in 2014, which would also give the Federal Reserve less room to continue its ultra-easy monetary policy.

But it’s still too early to begin freaking out. The Affordable Care Act could deal another blow to inflation.

“If Obamacare succeeds in lowering health care costs further then it will have important implications not only for fiscal policy, but the disinflationary impulse will also continue to provide a favourable backdrop for the Fed to maintain its über-accommodative policy stance for longer,” said TD Securities’ Millan Mulraine.

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