Determinants of the inflation rate of the health care CPI in the US

Abstract

A key issue in health care reform in the United States is the need to contain the inflation rate of the consumer price index (CPI) for health care services (IRCPIHC). Although previous literature has provided a variety of arguments regarding the causes of the rising IRCPIHC, relatively little has been done of a formal empirical nature to test these various arguments. We estimate a reduced-form equation for the US that indicates the IRCPIHC is an increasing function of general inflation, the population percentage over age 65, real malpractice insurance premiums, the population percentage covered by Medicare, increased usage of technological innovations in medicine, and real GDP growth and a decreasing function of the number of physicians per 100 000 population.