Inflation could spark higher health care costs

The news that national health expenditures rose a modest 4.4 percent in 1996 is not likely to be repeated, according to a new estimate by Milliman & Robertson. Though M&R does not foresee an immediate return to the days of double-digit increases, its 1997 – 2000 health spending forecast predicts a moderate rise, due mostly to slightly higher inflation. M&R's formula, based on inflation (as well as out-of-pocket payment trends and real personal income levels) allows that a 1-percent increase in the consumer price index translates into a 0.67 percent boost in health expenditures. Less predictable, says M&R, are legislative efforts to regulate managed care's cost-control strategies–efforts that M&R says could force expenditures significantly higher.