NU Online News Service, May 21, 2004, 5:58 p.m. EDT – The federal Bureau of Labor Statistics is reporting evidence that medical cost inflation is cooling off.[@@]

The national medical care price index increased only 3.7% in 2003, the BLS says in a research note.

The annual medical cost inflation rate hit a low for the decade of less than 3% in 1997 and rose steadily to 5% in 2002. The 2003 rate is the lowest the BLS has recorded since 1999, the BLS says.

When BLS researchers compute medical cost inflation rates, they look at the unit price of specific goods and services rather than the total cost of caring for an individual over the course of a year.

Experts point out that overall U.S. medical costs are increasing much faster than unit costs because of the aging of the population, the introduction of expensive new products and services, and, in some cases, efforts by providers to make up for low unit prices by providing more care.

But BLS researchers report that unit price inflation rates are down in almost every major category.

The unit price inflation rate for hospital services and related services fell to 6.4% in 2003, from 9.8% in 2002, and the unit price inflation rate for physicians’ charges fell to 2.3%, from 3.2%.

The unit price inflation rate for prescription drugs and medical supplies fell to 2.5%, from 4.5%.

“Several highly popular prescription drugs switched to over-the-counter status,” BLS researchers observe in the research note.

The shifts helped lower the unit price inflation rate for drugs, because OTC drugs are usually cheaper than prescription drugs, and the BLS keeps a prescription drug in its sample for one survey after the drug switches to OTC status.