The Biden inflationary spending binge was caused by two stimulus bills, the American Rescue Plan (March 2021) and the so-called Inflation Reduction Act (August 2022). These bills drove up general inflation (as measured by the Consumer Price Index, or CPI) to levels not seen since the early 1980s.
As a consequence, inflation in health care prices appeared relatively subdued. CPI peaked at over 9 percent in the summer of 2022 and did not drop back to 3 percent until June 2024. During this period between March 2021 and June 2024, prices for consumer items excluding medical care increased 20 percent, while medical care increased less than 8 percent.
Historically, this is highly unusual. For decades, prices of U.S. medical goods and services have increased significantly faster than other items consumers purchase directly, and this has gotten worse as government interference has increased.
In other words, Bidenflation camouflaged that trend for a while. Now that the Biden spending growth is in the rearview mirror, health care prices are resuming their traditional march higher than other goods and services.
The figure shows inflation for consumer items other than medical care, versus the biggest items of medical care, over the past 12 months to July 2025. Non-medical goods and services increased by 2.7 percent.
Historically, hospital prices have risen much faster than other medical prices, and this trend is returning. Inpatient prices increased by 5.4 percent over the last twelve months, while outpatient prices increased by 6.4 percent. Physician services increased by 3.1 percent, only slightly more than non-medical consumer goods and services. Meanwhile, prices of prescription drugs actually rose slower than non-medical items, just 0.9 percent (although this was a result of a price jump at the beginning of the year, followed by a drop).
Now that the Biden spending binge is behind us, Congress and the Administration must focus on tempering health care inflation. Hospitals are by far the number one culprit. Steps to limit hospital price inflation include: Reversing the consolidation of hospitals into anticompetitive health systems, paying the same prices to hospitals for outpatient procedures as independent physicians receive, and getting Medicaid money laundering – through which hospitals and states collude on accounting tricks to get more federal dollars – under control.
