Higher Health Costs Forecasted to Dwarf Food, Fuel and Future Inflation.

PALM BEACH GARDENS, Fla. -- If potential solutions are not acted upon now to curtail medflation/nursing inflation, then the pressures exerted on American households by increasing food, fuel and fading home equity, will appear small by comparison. Medical service costs (Medflation) are increasing faster than the overall inflation rate, which is measured by the Consumer Price Index (CPI). Medflation is up 77% from 1992-2005, while the CPI is up only 39%. More specifically, the costs for medical services rose nearly twice as fast as the CPI. Managed care slowed this trend during the 90's, but consumers of health are now faced with expenditures accelerating faster than the CPI. The United States (US) Bureau of Labor Statistics (BLS) and Occupational Employment Statistics (OES) reported that medical/healthcare inflation has increased, on average by 5.0% per year over the past nine years. The Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Fund (OASDI) reported this week that over the last 20 years, the medical index increased by nearly 6%. Finally, based on BLS-OES data, nursing costs have increased at an annual rate of 4.48% to 4.75%.

SOURCE         <                <  PROF-

9 YRS
BLS - Borbely  <                <  RN

3.59%
               <                <  LPN

4.49%
BLS-OES        <                <  RN

4.75%
               <                <  LPN

4.48%

According to Blue Cross and Blue Shield, medflation has exhibited nearly double-digit increases in some categories with numerous studies commissioned to determine the causes and consequences of these escalating costs. Hospitals continue to experience profit pressures with salary costs being one of the largest categories. The BLS reported in 2007 that nurses constituted the largest healthcare occupation overall. Salary cost pressures will continue to increase as the shortage of nurses grow; compounding these pressures are the 47 million Americans without healthcare, the 73 million Americans who are "underinsured" and the prospect of nationalized health insurance for all Americans. In 2001, nearly $100 billion was spent on healthcare for the uninsured and with national health coverage, the demand for nurses will skyrocket, making BLS averages/trends appear low.

The American Medical Association and the Institute of Medicine have published studies demonstrating a positive relationship between the level of nurse staffing and the quality of patient care. The Veterans Administration (VA) studies also highlight the VA's awareness of the acute shortage of nurses. Public Law 107-135, which became effective in 2002, requires the VA to establish a nationwide staffing policy to ensure appropriate patient care. Some states have already enacted legislation regarding nursing staff levels. California became the first state to mandate a minimum nurse/patient ratio for acute care. Increased inflationary pressures will be exerted as the need for this minimal nurse staffing is required on a national level.

Additional studies by researchers at the US Government Accounting Office and the US Inspector General for Health and Human Services have documented similar persistent problems in the nation's nursing homes. The nursing workforce is shrinking and with an aging population of baby boomers, increased demand on an already strained system is inevitable. With this growing demand and simultaneous falling supply, overall projected nursing costs make current trends idealistic. Based on this data, a more realistic inflation forecast is 5.0% to 5.75% for RN care and 4.5% to 4.75% for LPN care over the next 10-20 years.

Acknowledgements: Authors thank James Borbely, Ph.D., Economist, US Bureau of Labor Statistics, for key unpublished data. Additional information available in the full article from B.F. Pettingill, Ph.D. and Nils Westerlund, DPT at 561-622-0330 or www.bpettingill.com.