Washington – April 10, 2014
“A welcome relief from rising health care cost for U.S. consumers is being less warmly received by the Federal Reserve.”
Mr. Abbott, a Washington economist, is heard explaining it to Dr. Costello, a physician.
A: The cost of health care services rose just 0.8% this year.
C: That’s good news. We all have been working hard to reduce costs,what with meaningful use, and evidence-based medicine, and transparent patient portals. It’s hard work.
A: Its not good news.
C: What?
A: Health care sevice prices are down from its 10 year average of 2.6% increase.
C: That’s really good.
A: No,its not.
C: Why?
A: It’s a sign of persistent deflation.
C: Aren’t we afraid of inflation?
A: Not now.
C: What?
A: Their current goal is 2% inflation.
C: Whose?
A: The Federal Reserve.
C: Who?
A: They measure the economy.
C: How?
A: Using the Personal Consumption Expenditures or PCE.
C: What?
A: LIke the Consumer Price Index, the PCE measures what people spend on things.
C: Why?
A: People spending more money on things means the economy is growing stronger.
C: Who says?
A: Mr. Bush. Remember, he asked us all to go shopping to get out of the recession.
C: Where?
A: In America, of course.
C: What do health care services have to do with the mall?
A: Health care services make up 25% of the prices measured by the PCE.
C: So what.
A: Physician fees went up only 0.2%, down from 1.6% in 2012.
C: THAT’S not good for me!
A: No, its not.
C: What!?
A: Nursing home prices went up only 0.3% rather than the 1.8% rise of two years ago.
C: I know, I know. That sounds good but its not?
A: Right!
C: Why?
A: If health care prices don’t go up, the PCE doesn’t go up, and our economy looks stagnant.
C: Oh, boy! I think I got it. If all the efforts to reduce health care costs succeed, the PCE will not rise, inflation will be less than 2% a year, deflation will persist, and the Federal Reserve will label the economy as stagnant.
A: Now you’ve got it!
C: What about the impact of the Affordable Care Act?
A: Economists agree that the impact of Obamacare is not yet clear.
C: Oh boy!
A: Any questions?
C: Just one.
A: What?
C: Who’s on first?
HUB's LIST of medical fun facts 
Hub Thanks for the clear and lucid presentation regarding the complexity of the health care system and itâs relationship with inflation and deflation. After reading your missive, I have concluded that economics really is your strong suite and to think you wasted all those years on medicine is a national travesty unlike any other in the twenty first century. Now I know who is on first, but whatâs on second for us and I just donât know about third., please advise