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How inflation fueled health care costs

Ricardo Chujutalli, MD, MBA and Jessica Yoong
Policy
February 20, 2022
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The 3-hour concert was over. On the way back to the car, the excitement of it all kept us singing the lyrical masterpiece. I turned on the ignition and typed in our address.

“You have 1 hour and 35 minutes to go,” the GPS alerted me. I glanced at the fuel gauge. The gas floater barely survived the red indicator.

Taking no risks, I drove us to the nearest gas station to refuel. I parked, grabbed my jacket, and just as I was about to slide my credit card, my eyes sunk in on the price: $4.79 per gallon.

“Wait, what? Wasn’t the price at $2.75 less than a year ago, Ezrica?” I asked my co-pilot, perplexed by the leap in price.

This is not the only change we have seen lately. We have exchanged handshakes for head nods, replaced workspace for Zoom calls, and traded professional clothes for easy-to-wash scrubs. The covid-19 pandemic has induced a chain of reactions in how we go about our day.

With it, we have seen the rise and fall of variants–the latest one, the Omicron, corralling at least 99 percent of the cases in the US. Just as we are putting the last piece in solving one variant puzzle, another one creeps in through the crevices. The amount of stress on the pillars of our health care systems remains high.

While some predicted this of the pandemic, many of us did not expect inflation to also stay relatively high. As of December 2021, the annual inflation rate accelerated to 7 percent, a big leap since the early 1980s. In his remarks, Federal Reserve chairman Jerome  Powell touched on this topic, saying “Inflation has increased notably and will likely remain elevated in coming months before moderating.” How we look at price levels in the market of consumer spending in our economy seems to have derailed from the standard curvature lately.

Initially, we might have felt it more vicariously, but it is becoming more relatable by the day. Remember that Dollar Tree item you bought a few months ago? Well, check the price again. Or what about the toilet paper you bought from Costco? Look at your receipt more closely.

These retail stores are not the only ones suffering from inflation, though. It is approaching our health care workplace, too. Whether you are a health care employee, in administration, or a patient, we have felt the jarring hit.

So, where is inflation taking us?

What we are seeing are higher salaries and a tighter labor workforce. “I am flying to New York to work for a couple of weeks. The pay is too good to pass.” My nurse friend told me at the beginning of the pandemic. “$6,000 a week is some nice cash,” he appended. The demand for health care workers like him has been at an all-time high. Supply, on the other hand, has been at the short end of the stick. A survey by Chartis Group found that rural hospitals were experiencing a staffing shortage and becoming more vulnerable to the effects of the pandemic.

In the realm of medications and hospital stays, we have seen a spike in drug prices by 33 percent and costs for inpatient hospital services by 30 percent since 2014. This provokes a dissonance between patients’ budgets and the necessary medicine prescribed by their physician. Affordability often plays a major role in a patient’s adherence. Treatment or medication has become out of reach for some patients, impeding them from receiving proper treatment when necessary and paying higher costs down the road.

Inflation has exacerbated the ever-present tension that exists in providing high-quality health care while simultaneously keeping overhead costs low. By driving down the value that can be obtained at a particular cost, inflation has obliged health care systems to operate with an even slimmer margin as they continue to navigate the rapidly shifting landscape of reimbursement policy. The standardized best practices that health care systems have enacted as a means of cost containment over the years will become even more crucial as inflation continues to impact every aspect of the health care industry. In addition to the supply chain issues that have been a hallmark of the covid-19 pandemic’s logistical plight, a growing shortage of health care workers necessitates that many health care facilities operate with even leaner systems. As hospitals scramble to ameliorate the growing demand for health care workers, many are offering large financial incentives and some are finding it difficult to stay fiscally afloat as inflation amplifies the cost of labor.

While the outlook may seem dreary, there may be some silver linings to be found when the focus is readjusted to take in the big picture. Health care systems and companies across all industries have been forced to utilize technology and double down on efforts to streamline processes to minimize waste and maximize efficiency. Successful organizations have evolved dynamically throughout the pandemic and have experienced progress at a rate that may never have been realized without the pressing challenges brought about by COVID-19 and inflation.

On that night, we felt the impact of both, COVID-19 and inflation. We had worn a mask the entire segment of the play. Now, in the car, my wallet felt a bit lighter. The noise of traffic slowly faded into the night. I could hear the engine of the car. For a brief second, I looked at the fuel gauge once we arrived. It read half empty. I pulled up my phone, opened up my notes app, and wrote: put gas, find a more affordable price.

I was determined to beat inflation.

Ricardo Chujutalli is a physician. Jessica Yoong is a medical student.

Image credit: Shutterstock.com

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