Let’s discuss 2026 health care premiums and what they mean to the Fed’s preferred measure of inflation.
Medicare Premium Announcement
I will return to the lead chart in a bit. First, let’s look at health care cost estimates for 2026.
Medicare Premiums & Costs for 2026
- Medicare Part B (Medical Insurance):
- Standard Premium: $202.90/month (up from $185).
- Annual Deductible: $283 (up from $257).
- Higher Income (IRMAA): Premiums increase based on your 2024 income, with brackets up to $689.90/month for the highest earners.
Please consider the Centers for Medicare & Medicaid Services announcement on 2026 Medicare Parts A & B Premiums and Deductibles
The standard premium (not counting deductibles) rises by $17.90, an increase of 9.7 percent. The brackets across the board are up 9.7 percent.
There is a bit of reverse bracket creep for those in small windows. But deductibles are slightly higher.
For Part B Immunosuppressive Drug Coverage only, the standard premium is up from $110.40 to $121.60. That’s an increase of $11.20 per month or 10.1 percent, again with slightly negative bracket creep.
Medicare Part D kicks in at $109,000. The 2026 income related deduction is $14.50 per month, up from 13.70 per month. That’s an increase of only 5.8 percent.
Medicare Advantage Plans
About 52 percent of those on Medicare are in Medicare Advantage Plans. Those premiums are in addition to the standard Medicare Part B premium.
Fortunately that premium is expected to decline slightly.
Overall Medicare Increase
Factoring in slightly negative bracket creep, slight increase in deductibles, and half in Medicare Advantage plans, the average Medicare increase is ~9.25 percent.
Corporate Health Insurance Plans Key Projections
- Aon and WTW project employer-sponsored health plan costs to rise by approximately 9.5%.
- Business Group on Health reports a median employer prediction of a 9% increase, which employers plan to manage down to 7.6% with plan changes.
- Employee Premium Share: Workers may pay 6-7% more in premiums, while deductibles and copays could also rise, say Mercer and National Insurance Services.
- PwC expects an 8.5% medical cost trend for group health insurance for the third consecutive year.
- Pharmacy Costs: Projected to rise by 11-12%, with GLP-1s (for weight loss) being a major factor.
- Small Businesses (ACA Plans): Median premium increases of around 11% are anticipated, with some insurers seeking much higher rates, according to Venteur and KFF.
The above compiled from an Grok AI inquiry.
The CPI only counts expenses directly paid by consumers. The Fed’s preferred measure of inflation is the Personal Consumption Expenditures (PCE) price index. PCE does count expenses paid on behalf of consumers, so ignore the worker share expected increase of 6-7 percent.
Small businesses are much more impacted. Averaging all of the above, I will again estimate price hikes of ~9.25 percent.
Obamacare Premiums
CNN reports Obamacare enrollees get first look at 2026 prices as premiums soar
Premiums for Affordable Care Act coverage will skyrocket 26%, on average, next year, according to a KFF analysis released Tuesday evening, just days before open enrollment starts on November 1.
The price hike is one of the largest jumps since Obamacare plans debuted more than a decade ago — and it doesn’t factor in the expiration of the enhanced premium subsidies.
Several states that run their own Obamacare exchanges have announced that premiums will at least double next year if the enhanced subsidies lapse.
In New Jersey, premiums will soar to more than $2,780 annually — a jump of more than 174%, on average — because of the enhanced subsidies’ expiration and insurers’ rate hike of 16.6%, according to the state’s Department of Banking and Insurance. About 60,000 enrollees in Get Covered New Jersey will completely lose federal assistance in paying their premiums in 2026.
The enhanced subsidies, which a Democratic Congress approved in 2021 and extended the following year, have helped drive Obamacare sign-ups to a record 24 million for this year.
Around 17 million people signed up for 2025 coverage on healthcare.gov. Another roughly 7 million enrollees live in states that run their own exchanges.
Mapping the Uneven Burden of Rising ACA Marketplace Premium Payments
Please consider Mapping the Uneven Burden of Rising ACA Marketplace Premium Payments due to Enhanced Tax Credit Expiration by KFF.
Enhanced premium tax credits expire at the end of this year. Enrollees currently receiving premium tax credits at any level of income will see their federal assistance decrease or disappear if enhanced premium tax credits expire, with an average increase of 114% to what enrollees pay in premiums net of tax credits. Since premium payments are capped based on income and family size, there is little geographic variation in the resulting increases in premium payments for enrollees with incomes below 400% of poverty. Out-of-pocket premiums for people with incomes below 400% of poverty will increase by hundreds of dollars to over $1,500 per person on average.
That paragraph contains the number we need for my PCE inflation analysis below, “an average increase of 114%”.
The setup is really dire for some income groups. For those at 401 percent of poverty level, the minimum percentage increase in any state is 84 percent in New York.
In Wyoming the increase is 421 percent. In 20 states, including Texas, Illinois, Florida, and North Carolina, the increase is over 200 percent. Those increases are for a 60-Year-Old Making 401% of Poverty ($62,757 per Year).
The overall average for all poverty levels is 114 percent. Click on the link above for a series of interactive maps.
How Many People Are on Obamacare
Chrome AI: “Approximately 1 in 6 Americans under 65 (or 16.4%) were enrolled in coverage through the Affordable Care Act (ACA) Marketplaces and Medicaid expansion in 2024. As of early 2025, over 24 million people were enrolled in the ACA Marketplaces alone, which is double the number from four years prior. The total number of uninsured Americans has fallen to 7.9% in 2023, a near halving of the rate before the ACA’s major provisions took effect.”
ABC News reports 1 in 4 Affordable Care Act enrollees would ‘very likely’ forego health insurance if premiums double: Poll
“What we’re really interested in is understanding how marketplace enrollees are thinking about their decisions around coverage in 2026 … and so we wanted to actually hear from the people that were being directly impacted by this,” Ashley Kirzinger, director of survey methodology at KFF, told ABC News.
Kirzinger said the finding that one in four Americans would “very likely” forego insurance if faced with the same scenario is concerning.
“One of the things that the Affordable Care Act did was decrease our uninsurance rate in this country,” she said. “And so this could have major implications and major consequences as more people become uninsured for the first time in a decade.”
“And so, it’s not that they want to go without coverage. It’s that that may be the only option available to them,” Kirzinger added.
Healthcare Percent of PCE
AI: “Healthcare has a significant weight in the Personal Consumption Expenditures (PCE) Price Index, typically around 15-18%, but it’s much higher than its share in the CPI because PCE includes health spending paid by third parties (employers, government) on behalf of consumers, not just out-of-pocket costs, making it a broader measure that reflects overall economic impact.”
Q: How Did I Calculate the 16.66 percent weight in the lead chart?
A: By looking at total PCE expenditures for 2024.
Goods and Services PCE 2024 Annual Totals
In practice, the BEA uses a chained Fisher formula, where weights are dynamic period-specific shares (typically quarterly) derived from averaging current-period and prior-period current-dollar expenditures.
This allows the index to reflect evolving consumer spending patterns without fixed annual baskets (unlike the CPI, which updates weights biennially).
My chart is an approximation. Healthcare Annual Average 3,315 / Total PCE Average 19,896 = 16.66 percent shown in the lead chart.
Percent Increase Synopsis
- 16.4 Percent on Obamacare: Price up 114 Percent (KFF)
- 7.9 Percent No Insurance (KFF Estimate): Price up 0 Percent
- 75.7 Percent on Medicare or Corporate Plans: Price up 9.25 Percent (Mish)
If there are no dropouts, the PCE weight of 16.66 percent will jump and so will the impact.
If everyone dropped out of Obamacare, the healthcare services weight could drop.
At the expected 114 percent average increase, over 50 percent could drop out and spending would remain about the same. Those who do remain are apt to go for cheaper plans. That means less insurance for the money and thus higher PCE inflation.
In practice, I expect a slight rise in the Health Care weight, and a net 1.5 percentage point increase in the PCE in 2026 due to the price hikes noted above, not counting huge Obamacare impacts.
Good Morning America!
Healthcare is now approximately 16.66 percent of the entire PCE basket, much larger than all durable goods combined, and only 1.5 points behind housing.
2026 medical-cost trends are running 8.5 percent to 9.5 annual percent increases. Those projected increases will add 1.4 to 1.6 percentage points to headline PCE inflation before food, energy, shelter, or tariffs move prices at all.
Again, this ignores the huge Obamacare impact on 1 out of 6 people.
In isolation, the Fed will need to hike rates or deal with higher inflation. Of course, health care is not in isolation. If people spend more on healthcare, they will spend less elsewhere, get bigger raises, or go deeper in debt.
Spending less elsewhere would be disinflationary elsewhere, but that ignores tariff price hikes and the overall recessionary (if not stagflationary) forces.
Much spending is not discretionary, especially food, housing, and energy. So, factor in electricity rates that are rising fast. Someone has to pay for the AI buildouts, and that someone is the average consumer.
Homeowners’ Insurance rates and property taxes are also surging. Homeowners’ insurance and property taxes are not in the PCE or CPI at all!
And tariffs add to the cost of durable goods, especially auto parts and appliances.
Anger rates to soar. How can it not?
Instead, if Congress finds hundreds of billions to extend the Obamacare credits to bend the cost curve, it will add to deficits, putting downward pressure on the dollar and upward pressure on inflation.
But Obamacare is only 16.4% of Healthcare. What is Congress or the administration going to do about the bigger pieces that impact the PCE (Medicare and corporate insurance)? About electricity? About property taxes? About homeowners’ insurance?
Meanwhile, Trump says “affordability is a scam.” What a hoot!
The combined picture is one of stagflation, putting upward pressure on interest rates.
Alternatively, if jobs crash and reduce overall demand enough to offset the inflationary aspects of health care, energy, tariffs, and insurance, we will be in recession. This is the alternate scenario.
In between, there is no realistic soft-landing path that threads the needle for the Fed or the administration.
Related Posts
November 23, 2025: Can Trump or Anyone Possibly Fix the US Affordability Crisis?
Trump and NYC mayor Zohran Mamdani will fail. Here’s why.
December 3, 2025 : Small Businesses Drop 120,000 Jobs in November, ADP Total Down 32,000
It’s another grim month according to ADP.
December 4, 2025: Challenger Reports Employers Announced 71,321 Job Cuts in November
Announcements imply future, not immediate, layoffs and unemployment claims.
December 5, 2025: Revelio Says Payrolls Decline by 9,000 the 5th Drop in 7 Months
We don’t have BLS reports but we do have ADP and Revelio.
December 5, 2025: Welcome to Tariff Complexity Hell, No One Knows What Trump Will Do
Tariffs are a tax, and complexity adds to that tax.
December 3, 2015: Electricity Costs Surge 6.7 Percent from Year Ago, Residential Consumers Hammered
Expect a backlash. Residential customers pay double the industrial rate.
Energy is 2.1 percent of the PCE. Even if gasoline prices decrease, consumers rate to be very upset over electricity and natural gas prices.
Finally, please note the key question: Republicans Own Health Care Now, What Will They Do With It?
A poll shows who really won the shutdown war. Let’s start there.
Good morning America. There is no solution for the Fed or the Administration.
One xenophobic person blamed immigration citing an alleged 50 million immigrants, a preposterous number.
What’s happened is a combination of aging demographics, stupid Fed policy, Congressional spending out of control, and fraud.
That said, I am not in favor of uncontrolled immigration. I do favor sensible policy going forward. But deport them all is xenophobic idiocy.
Food prices would soar. So would construction costs. Think about hotel staffing. Think about age groups.
Actually, take off your xenophobic MAGA hat and just think.
Importantly, ask why we spend so much prolonging lives for a few months, keeping people in intense pain the whole time. It make little sense.
Reasonable immigration policy is impossible in the United States. It would require Republicans to get rid of their primary wedge issue. Why would anyone vote for Republicans if they didn’t think there were 50 million Mexican rapists in the country?
Millions? I am sure TACO is up to trillions by now /s
I am inclined to think your fear of deportation at current levels is a bit exaggerated when compared to the numbers put up by administrations of the recent past. Please have a look at the linked chart:
https://infographicsite.com/wp-content/uploads/2024/10/deportations-under-us-presidents-statistics-infographic.png
I lived through all those administrations and frankly do not remember any deleterious impacts on our economy as a result of the deportations. I am not a fan of the tactics being used by this administration. Noted this morning on Fox Business, some 70,000 have been arrested with no criminal record; that is really bad policing.
While I do not advocate this strategy as I have not completely thought it through, there is a side of me that would have the federal government refrain from enforcing immigration laws in sanctuary states and cities. Afterall, they have made it clear they do not want federal presence so the experiment should not be met with too much resistance. We could see if agriculture, construction and hotels/motels flourished or at least did better than non-sanctuary jurisdictions. It would at least allow a real-world, real-time evaluation of current policy. If sanctuary policy became an issue, those jurisdictions would do something to remedy the situation, hopefully.
If there were no deleterious impacts deporting them then why deport them at all? Certainly criminals need to be imprisoned or deported but if everyone else is not having an impact then what’s the issue?
Keeping them, particularly if they are sucking on the social safety net teat. are deleterious and cost each and every US taxpayer. Deporting them did not cause problems.
And yet despite deporting them, the social safety net is still crumbling, even more so with less people paying into the system.
I seriously doubt illegal immigrants are net payers into the social safety net. There are studies that have estimated specific numbers and all I have seen support my doubt. I also have no expectation that removing every illegal would balance the social safety net books, but it would be a step in the right direction.
With respect to government services provided to illegals, such as free education, fire, police and other social services, increased road use and their contribution to accidents, there is no way illegal immigrants are net positive to our system. Most likely left their home country because this country’s benefits were better. I am not talking about the folks who come and contribute via getting a job or building a business, I am referring to the freeloaders.
I have personal experience having been rear ended by an illegal who had invalid proof of insurance for the attending law officer. End result, he was not cited for no insurance, and I paid for the extensive damage to my vehicle plus alternate transportation for a couple months while it was repaired. Fortunately, no one was hurt.
Controlling the border is one positive Trump accomplishment.
Interesting that you mention insurance. Insurance claims are down 9% not because of fewer accidents, but because Americans have stopped paying for auto insurance.
https://www.youtube.com/watch?v=zRxa995oyUg
Not sure that makes sense. The only way auto insurance would go down from people not buying it is:
1) Both parties don’t have it (most people have coverage for uninsured motorists) AND those are the people getting into accidents.
2) A huge number of people took off collision once car was paid for AND they are having accidents.
True, you don’t have to buy vehicle insurance.
Unless you need vehicle tags/plates and a renewed registration.
Duh.
Being deported is the new social safety net. It’ll tidy up those homeless areas in a jiffy.!
Everyone i see in homeless camps in my area is white. Everyone i see on the construction sites are Mexicans.
If you agree to be leave they give you $1500. If you get deported, they give you free transportation!
I agree, but not long and drawn out, but fast, so they can mov on with there lives
That’s because the bulk of the people being deported were apprehended either at the border or very close to the border, so they were never part of the economy. Very few people in the decades old Little Mexicos of Texas’s major cities were being deported unless they committed a crime.
agree 100%
Blaming immigrants for what is going on is a tried-and-true strategy to deflect attention from the connivance between members of Congress (regardless of party) and the healthcare industry (and all other industries). Mish, you keep talking about many causes of inflation, but you keep refusing to acknowledge that corporate kleptocracy plays a big role in this.
Illegal immigration is certainly part of the problem when hospitals have to provide care and not get reimbursed.
That is true in general.
Not just illegal immigrants.
Hospitals will not turn anyone away.
Hospitals get reimbursed more easily for citizens and greecard holders. Most citizens and greencard holders have insurance due to the ACA. Most of those that don’t have insurance are generally here illegally in some way. Their ER visits do drive up the health care costs for everyone. The problem with any system that doesn’t force payment for use in some way is it becomes subsidized by those that can afford to pay. A government subsidy is also just a tax on those that can afford to pay. Many of these people that skim off the system don’t do anything but cash and don’t even have bank accounts. They then use public services where possible for free. The ACA tried to make these people come in from the cold so to speak. But the ACA has become the UCA (Unaffordable Care Act).
Trump is right to want to kick out anyone here illegally. They are driving up the costs for everyone else.
Medical care is a lot more unaffordable if you don’t have insurance at all!
Will not turn away people in emergency situations!
I agree but its the same with uninsured /to poor to pay citizens. But you cant say that about the citizens or you will have to admit to bigger society ish problem then find a solution.
Ha! Just imagine the fallout from a decision like that ! MD says, sorry family X, we have to pull the plug on Granny. Do you want to watch? [lol]
The lawsuits would go on long after Granny had passed.
Everybody wants to got heaven but know body wants to die
Well, how do you know you will be revived in Heaven to float around on a cloud all day strumming a harp?
And imagine if you remembered your last days, the months of suffering in bed until you died? Or getting creamed and crushed by a truck? Or falling into the tree grinder?
Are all these memories erased in Heaven? Does nobody remember anything from life on Earth so that they can be happy going forward? Is that why no relative of mine already up there looks into the future and sends me the winning Powerball lottery numbers? I mean, we be related, no?
All those lawsuits should be instantly tossed if Granny OR family X has any assets they could have used / sold etc to pay for Granny’s care.
In other words family should have to paid till they are dead broke or they let Granny go.
You might also look at how we have structured health care. Primary care, the most effective care is paid the least – so who wants to go into primary care. Instead we are all shuffled off to various specialist – all quite well paid. Each doc does their own suite of tests, on to the next specialist for another round of test and the machine keeps running. And insurance pays for all it .
I’m an inflation bull but this analysis greatly exaggerates the impact of premium increases on CPI/PCE. The BLS attributes much of the premium increase to higher utilization and to quality effects (new drugs vs price increase for existing drug) so the measured inflation is far less than premium increases.
How does it exaggerate anything?
Medicare going up 9.5 percent.
Corporate health plans 9.5 percent.
Put 100% on Obamacare. Or just the base 26% if you want.
Heathcare is 17 percent of the PCE.
It’s going up ~10 percent.
That will add ~1.7 percentage points to PCE.
Now what is your math?
since you used Grok I asked it : “who is right the author or the commenter https://mishtalk.com/economics/health-care-inflation-bomb-makes-the-feds-2-percent-target-almost-impossible/#comment-395718. comment “I’m an inflation bull but this analysis greatly exaggerates the impact of premium increases on CPI/PCE. The BLS attributes much of the premium increase to higher utilization and to quality effects (new drugs vs price increase for existing drug) so the measured inflation is far less than premium increases.” answer in 100 words.” And it replied “The commenter is correct. The author’s analysis assumes health care premium hikes (e.g., 9-10%) directly add 1.5-1.7 percentage points to PCE inflation, given its 17% weight. However, BLS and BEA methodologies for CPI and PCE adjust premium increases for higher utilization (more services consumed, treated as quantity growth) and quality effects (e.g., new drugs’ value over price hikes). Thus, measured price inflation is often far lower than raw premium rises, avoiding full pass-through to inflation metrics.”
Great analysis. It does seem stagflation is a very real possible outcome, yet curiously neither stocks nor more importantly bonds reflect this. The 60% run in gold might not be for nothing after all.
Think maybe Congress might do there job. Democrats made this whole issue worst during the Covid scam just dumping unlimited amount of funds to the insurance companies. The same question still exist today that was ask of Barack Obama, how does ACA lower medical cost????
Those medicare cost increases are cheap compared to what people are getting. We’re deficit spending trillions over budget and the national debt is balooning to subsidize these cheap medicare premiums. If people think their cheap premiums subsidized by robbing future generations are expensive, they are free to vote for fiscal responsibility meaning not voting for either of the republicans or the democrats because thats who is making health care so expensive, but 99% of voters are actually voting for this inflation, though some actually like bubble house and stock prices, so they should gladly pay a little more.
Not sure which inflation figure is the more distorted; the 2% “goal” or the recently reported “3%?”
Great post, Mish.
I owned a business that employed 54 people until 2024. Every year, I’d have to eat a 10-15% increase in healthcare insurance costs. Much of the time, we’d get an introductory rate at a different provider, and have to switch everyone to another plan. The next year, we’d get a big increase from the new provider.
Our next strategy would be to chip away at the basic benefit.
For instance, we covered 50% of the deductible. We could choose a bigger deductible. We did that once, and that lowered our company’s expense. One year we switched to covering the last half of the deductible instead of the first half. That bought us a lower-cost plan.
It was always a dance; where could we squeeze the cost down a bit? What could we offer to the employees that would still be beneficial, but not crash our company’s ability to make a profit?
Mish wonder if 401 k contributions could be used to track the middle class. I would asumeif times get tough they would contribute less
I’m certain someone at the FED monitors your posts (and other financial bloggers). Hopefully, they will not capitulate to Trump’s demands to lower interest rates this time around.
I’m not so certain. I think people at the Fed pore through Harvard/Yale/Chicago papers written by Bernanke, Yellen, et. al.
Mish’s stuff is probably a little too ‘man of the street’ for them–no Ph.D in economics from an accepted institution.
You’d be foolish not to want to know what the “man (or woman) of the street” was thinking.
Same thing as being a CEO and having no idea what the people in your company are thinking.
Then again, this does happen but usually, those are the unsuccessful companies that go out of business sooner or later.
It looks like there may be upwards of $1B of fraud just in one state for PPP money. It begs the question how much fraud was there nationwide. It looks like tens of billions of dollars of fraud now that PPP loan defaults are rising. The government has said these would be forgiven but that those cases of fraud will not and be punishable by jail. Some have absconded overseas.
Trump is trying a backdoor way to remove anyone he wants at the Fed and it is going to work. The Supreme Court ready to hand him power by ruling any independent commissioners can be fired. This is Project 2025’s dream. The Fed is going to get neutered by Trump and be forced to only hold treasuries and nothing else. The bottom is going to fall out of the financial markets, especially in derivatives, but the real economy will do better and bring more speculators back to reality. Expect the unexpected from the Trump admin in 2026. Remember the guy at OMB is the one that authored Project 2025.
From Google AI:
Project 2025, an initiative led by the Heritage Foundation with a far-right policy agenda, proposes major restructuring of the Federal Reserve, aiming to reduce its independence, decrease its regulatory power, and potentially transfer control to the executive branch, which could increase political influence over monetary policy and remove consumer protections, with critics warning of increased financial instability and Wall Street deregulation.
Key Proposals for the Federal Reserve:
Reduced Authority: Significantly curtailing the Fed’s independent power, potentially eliminating its regulatory functions.Increased Political Control: Shifting monetary policy decisions to “elected officials,” increasing presidential and congressional influence.Eliminating Consumer Protections: Overturning post-crisis rules designed to protect consumers and investors, as noted by the Center for American Progress.Restricting “Lender-of-Last-Resort”: Limiting the Fed’s ability to intervene during financial instability, according to American Progress.Impact on Banks: Potentially requiring stricter lending, reducing market liquidity, and removing incentives for sustainable lending. Why It’s Significant:
Threat to Independence: The Fed’s insulation from politics is crucial for market confidence; Project 2025 seeks to dismantle this, according to Politico.Far-Right Agenda: It’s part of a broader plan to reshape the federal government and consolidate executive power, notes Democracy Forward.
In essence, Project 2025 seeks to transform the Federal Reserve from an independent central bank into an entity more directly controlled by the President and Congress, aligning with broader right-wing goals for deregulation and increased executive power.
More here:
https://blog.uwsp.edu/cps/2024/09/12/the-project-2025-monetary-policy-gold-standard-and-federal-reserve/
The Project 2025 monetary policy proposals include:
Returning the U.S. to the gold standard (commodity backed money).Elimination of the Federal Reserve’s dual mandate of maximum employment and price stability replaced with a focus solely on price stability.Reduce and limit Federal Reserve purchases of financial assets, including federal debt and mortgage-backed securities. Limiting the Federal Reserve’s lender-of-last-resort function, which offers loans to banks near collapse.Exploring alternatives to the Federal Reserve System, including elimination of the Federal Reserve and the implementation of “free banking”.
I read the last paragraph there and think most folks reading this blog, including the author, would prefer those bullet points IF the Fed continues to exist. So I’m struggling to find what parts of the last paragraph are bothersome to you other than perhaps the hindering their funciton of lender of last resort. Still, if there were no fractional reserve lending and backstops we would have a chance to have a system without moral hazard, where rates throughout the system would be based soley on financial risk and historical performance by both the borrower and lender.
In Florence, Alabama a Bronze Plan (lowest tier of ACA plan) covering a husband and wife in a household earning $63,000/yr in income has an unsubsidized premium cost of $1904/month (about $22,800/yr). Meanwhile, rent in Florence is about $1300/month ($15,600) for a 2 bedroom place. I think the PCE weight for the cost of healthcare premiums is “slightly” off.
Yes, but it’s “only” 16.7 percent of Health Care.
Not quite that because for people who have no income, it’s still nearly free.
And how many will just drop out, paying nothing?
This is why I have a hard time putting a PCE inflation percentage on this compared to Medicare and corporate plans.
But if everyone stayed in and the KFF average of say 100% holds.
There is one F of an PCE inflation increase.
PS The subsidized premium price for the hosehold described is free, so CPI sees no contribution, while PCE is supposed to capture the entire unsubsidized premium (which it might be doing since you point out ACA is only about 16% of the covered population).
At any rate, the fact that CPI sees a $0/yr figure and PCE sees a $22,800/yr figure for ACA premium contributions is just FUBAR.
What I find strange is home prices is about the same in France (my country), than the United States. Yet, monthly payment for rentals are 3 to 5 times higher.
Where it does come from? Especially since the France legislation has the reputation to be very hostile to owners who rent homes.
The United States has a wide range of rental costs dependent upon location. France has a much higher population density. Compare rental rates between France and states with population densities like New York, Massachusetts, New Jersey, California, etc…
If the FED wanted to reduce inflation it would drain reserves. Then simultaneously, it would gradually drive the banks out of the savings business. What would this do? It would make the banks more profitable, if that is desirable. It would also lower long-term interest rates by increasing the supply of loan funds but not the supply of new money.
Link: Fiscal Dominance and the Return of Zero-Interest Bank Reserve Requirements (stlouisfed.org)
“imposing high reserve requirements for zero-interest paying reserves may seem quite attractive to a policymaker interested in reducing the inflationary consequences of fiscal dominance.”
The first rule of reserves and reserve ratios should be to require that all money creating institutions have the same legal reserve requirements, both as to types of assets eligible for reserves, as well as the level of reserve ratios. Ideally, monetary policy should limit all reserves to balances in the Federal Reserve banks (IBDDs), and have UNIFORM reserve ratios, for ALL deposits, in ALL banks, irrespective of size…”
But the Ph.Ds. on the FED’s research staff think that banks are intermediaries between savers and borrowers. Not so.
See Richard Werner
HYPERLINK “https://www.youtube.com/watch?v=EC0G7pY4wRE”
See: “Profit or Loss from Time-Deposit Banking” in Banking and Monetary Studies, Comptroller of the Currency, United States Treasury Department, Irwin, 1963, pp. 369-386
I don’t understand the outrage. This is how ACA was written. Don’t like it? Maybe you should not have voted for the parasites that voted for it without reading it (meaning all of them).
But that would require that the glassy eyed Obama voter admit he/she/they got conned. And they’ll never do that. It would be too painful an admission for the highly educated but easily manipulated to admit.
A couple of thoughts: 1. the article barely mentions the ACA. This is far more about increasing health care expenditures across all payees. 2. The ACA, as written by the Obama administration was not what was passed by Congress. The provisions to control costs were stripped out by Senate Republicans (and a few conservative Democrats) and other provisions by the first Trump administration. The “glassy eyed Obama voter” got conned by the corrupt Republicans.
I don’t care if you blame republicans more than dems. No one who voted for this POS read it, understood it or cared what would happen in 10 years.
Not mentioning ACA ignores how we got here over the last decade, but sure, ACA has nothing to do with the bad incentives we have today. Sure.
Why do you think the ACA had a significant impact on pricing for the healthcare market in the first place? It required a few free services, like annual physicals and well-women checkups which cost a few hundred dollars per household. It also required acceptance of pre-existing conditions, which almost all Americans agree should be a requirement. But the costs of those issues hit immediately in year one and have nothing to do with today’s inflation.
ACA impacted the insurance market by making certain plans (i.e. the least expensive plans/catastrophic plans) illegal. I know this because that is what I had been buying as our household was and is led by business owners. Our insurance plans were cancelled twice in less than 6 months because they were deemed illegal after ACA was enacted.
If you look at the least expensive plans on eHealth today, they all start around $2200-$2300 for a 4 person family. That is today’s catastrophic plan. It covers nothing till you reach the max out of pocket, which all in runs 45-50k after you pay the monthly premium and then pay the deductible. And of course that resets every year. So 45-50k per year if you need significant healthcare services.
As a point of comparison, we were paying $450/month just before ACA made our plan illegal. This was in 2010.
In 15 years, inflation caused our insurance rates to increase by 400%?
There is nothing in the ACA that makes catastrophic plans illegal. I have one myself. That might have been an issue with the state you live in though.
depends on what you call catastrophic. I was happy to have an inexpensive plan that only covered things if something really bad happened. I was fine with paying for annual physicals.
Such a plan is now illegal. ACA made it so. Insurance companies were thrilled to re-market their slop as ‘more caring and customer focused that included annual physicals’. They sure are swell, aren’t they?
The primary cost control measure was the MLR which is still in place. What measures are you talking about?
The public option and requirements for the healthy to obtain a policy.
Obamacare bought us time. But you can’t keep kicking the can forever. The only long term solution is a single payer system.
bought us time? It retarded the ecosystem further by providing subsidies to plans that would never self sustain. That’s not buying time. It’s buying votes.
Nah it brought the numbers of Americans without insurance to record lows and made a huge dent in medical bankruptcies. And it gave time for the public to come around to the idea of Medicare for all, which now has majority support.
Sorry, medical insurance does not guarantee medical services. That is an idiotic fantasy that is partially how we got here. If my medical plan has a $7500 deductible, how can a poor person afford medical care? My blue cross/aetna/kaiser insurance card is no good if you can’t pony up the cost to get into seeing a specialist.
Also, 2/3 of bankruptcies today are in part due to medical costs. Let’s get our facts straight before making claims.
You really need to take a deeper dive into what is occurring. Your assumptions are all wrong.
The entire cynical motive of Obamacare was to be so bad that the people would scream out for single payer. Alas, they didn’t realize the cancerous, and self-perpetuating nature of the fascistic system they created. There are millions of vested interests in the sorry corrupt system we have.
But we’re actually at the point where people are screaming out for single payer. So it was a success.
Obamacare was originally designed and written with a public option that would have greatly helped in controlling costs, however the insurance industry paid off enough Congresspersons, to vote against it. I was not going to pass. Obama had to settle for half a loaf; his plan minus the public option.
I remember Max Baucus, Senator from my home state of Montana, was the final vote responsible for stripping the public option.
Even as a red-meat conservative, I recognized at the time that the ACA wasn’t gonna fly far without it.
I’m surprised it’s held on for so long as it is.
It’s the same thing that happened with cash for clunkers, another obama era giveaway. When money is changing hands, funny how the resistance melts away.
ACA was garbage from the start. Remember this from Gruber, one of the bill’s authors?
“This bill was written in a tortured way to make sure CBO did not score the mandate as taxes. If CBO scored the mandate as taxes, the bill dies… Lack of transparency is a huge political advantage… and call it the stupidity of the American voter or whatever, but basically that was really, really critical for the thing to pass.”
I may be wrong on this, but I think PCE inflation is still a poor measure of true health care spending inflation because Medicare & Medicaid are excluded (they are considered government financed). If you include Medicare & Medicaid, the share in PCE would be more like 25 percent than the calculated 16 percent. This doesn’t mean the national accounts are wrong. It means we keeping the true cost of health care behind a smokescreen of taxes and deficits, but at the end we will all pay, one way or the other, for those missing 9 percent of PCE.
One reason the Obamacare premiums are soaring is that a corrupt Congress, bribed by the insurance lobby, scuttled the inclusion of a public option, which was an integral part of the original design to control costs.
The insurance oligopoly has unlimited pricing power and can raise premiums and limit coverage at will. A public option with overhead costs of about 1% would have forced real price competition, but insurance lobby paid Congress millions in campaign contributions (bribes) to ensure billions in excess profits.
The same is now true regarding Medicare Advantage which now costs more per insured, than traditional Medicare.
As long as the US medical financing system is a vehicle for corporate graft, not for providing efficient care, we will continue to pay twice as much as a percentage of GDP than do other advanced countries.
Yes, absolutely, but politicians find it convenient to deflect blame on illegal immigrants for the increase in prices, not on their corporate donors.
Indeed. The least expensive PPO plan available on eHealth costs $2900/month in premium for a family of 4. It is a ‘bronze’ plan, meaning other than annual physicals, you pay for everything up to $7200/person with a $14,400 max out of pocket.
This is a catastrophic plan priced as though it covers most everything. By the time this plan pays for anything, the customer has spent nearly 50k in healthcare expenses. Definitionally, this is a catastrophic plan.
True. It’s called legalized corruption. As a nation, we are clearly leading the world when it comes to legalized corruption, and health care is not the only area where it’s rampant. Unfortunately, we now also aspire to outdo other developed countries when it comes to illegal corruption. Right now the US is already ranked as a pretty corrupt country at rank 29 in Transparency International‘s (illegal) corruption ranking The next update is due in February next year, and it may not be pretty.
There is an entire raft of inflationary logs floating down the river straight at the American consumers financial lifeboat.
The dollar will continue to see its buying power erode. Of the investments available to maintain buying power, gold mining stocks or some ownership of the Precious Metals themselves are grossly under represented in the average persons financial planning strategies.
Due to their appreciation, my portfolio has an over allotment in the PM space yet I am reluctant to re-balance because the mining stocks have not moved up much since their last earnings reports. This in spite of the underlying metal going up over $640 per ounce over last quarters average realized price. All of this is falls straight to the bottom line as costs are relatively fixed.
Mish used to discuss the gold and precious metals markets quite a bit but has stopped because his thoughts are well known to older readers.
I am thinking that it is time for a token article about PM’s so members can dig in to the topic and see if there are any refreshing thoughts in either direction regarding the PM market.
I’ve never been a big fan of precious metals but I’m now in gold and silver because it’s having a nice run and who am I to turn my nose at delicious delectable profits?
Of course, for now, I’m in it for the short term via options but that can change….
gold has been the best investment every century. when you account for war ravaged lands, and kings and presidents taxing peoples farms and castles out from under them. and the bonus that nobody in their right mind ever pays taxes when cashing in their gold coins to purchase land or food or whatever. simply the greatest after tax, after catastrophe asset for thepast few thousand years. nothing comes close. pro tip. store some around the globe in case of emergencies. saw the USSR implode in the 90s. shit can get dicey when the currency approaches zero……
What is your options strategy?
credit collars on the metals. Can’t lose.
Inflation is the mechanism of devaluing debt and paying it off with cheaper dollars.
The government and Fed is not particularly interested in acknowledging inflation but they surely want it to occur. If Americans see their standard of living fall as a result? Tough shit!
Hard assets that earn profits are the key to (relative) economic safety.
Got gold or silver mining stocks?
Inflation is the mechanism of devaluing debt and paying it off with cheaper dollars; it is also a gimmick that does not address the real problem of excess spending. As long as the government spends more that it takes in, there is a deficit and the debt is rising. It is simple math.
True!
Income is the ingredient from which debt (interest payments) is ultimately paid. Is real income increasing or decreasing?
I.e., the charges on debt are related to a cumulative figure; and since the multiplier effects of debt expansion on income, the ingredient from which the charges must inevitably be paid, is a non-cumulative figure…the debt must inevitably be repudiated.
ObamaDidn’tCare.
Impossible???? I believe that the current Govt can make reports say whatever they want them to say.
Excellent post!
For many years I’ve been warning about the inflation tsunami coming around 2030 largely because of the heavy burden of too many retired people draining social programs, not contributing anything and a declining population. The last wave of Covid inflation will be remembered as “good times” in comparison to what’s coming.
Throw in $40+ trillion in debt, anti-immigration policies, a useless political system, an idiot leader, and a population that seems to get dumber and dumber with each successive generation and you have the complete picture.
For those that lived through the inflationary spikes of the late 70s, its gonna be dejavu all over again.
Got hard assets and an exit strategy?
With hard assets and good relationships you do not need an exit strategy. For heavily indebted urban dwellers without the means to self insure? Run Forrest Run!
Of course but didn’t you exit from somewhere else and land in your farm? Glad you found somewhere that is working for you now, let’s see how well it holds up when the angry mobs wake up.
Playing on peoples fears is easy and low fruit. Lot’s of people and organizations operate successfully by preying on peoples fears. I can tell you that when the US catches a cold the rest of the world gets the flu when it comes to economic disturbances or social unrest.
Outsiders are exceptionally vulnerable in foreign countries!
For those of us that are comfortable at home in the US, Invisibility is important and having a low option pickup truck with inboard saddle tanks and big fuel storage tanks on the farm would be helpful if things went seriously south.
If I were living in a city that was totally dependent on just in time daily food deliveries from the outside? I would be like you and considering an escape plan.
For most it is impossible…
To be more specific, I returned to my roots after several trips around the world and an exceptionally successful (short) career in medical finance.
Working smart and hard are my favorite things in combination with curiosity and showing up every day.
Reserves: 2,878,164 down – 366,791 from a year ago.
life is much too fragile to think one knows where is best. it’s always a daily decision as life unfolds. best to stay flexible and have decent friends/family around the globe so one can make a run for it if things get scary. or take in people who are scared. i think the borders will continue to be porous for the next 400 years. little episodes like trump or jan brewer or ike’s operation wetback come and go. i lived in AZ for a long long time. the border is wide open. as is canada border. i’m close to their now.
The “projections” from commenters are mind boggling but they are insightful nonetheless. Many people here assume that I have neither friends nor family in other places in the world.
Hint guys: I wouldn’t even have started contemplating this if I didn’t already have friends and family doing it.
These people telegraph:
I could go on but what’s the point? People are gonna do whatever they want regardless if it’s in their best interest or not.
aye aye. i wish you the best. i was eyewitness and had oligarch as a client in russia post 1991 collapse. trust me, the lessons i learned were amazing. glad i was in my 30s. the old geezers there freaked out.
i’ve lived many places. when i lived in little haiti in brooklyn, a hood that was all caribbean people for a few miles, i felt very safe. those people already have weathered disasters and lived on next to nothing. rice and beans and taking care of each other. depending on the kind of economic debabacle it might have been the best place to be. nobody can say farmland is better or city is better. life is too complicated. history shows us that.
Survival becomes situational and preparedness (skills) based and favors the young and athletic. Few are prepared to live in a post-apocalyptic world. Even less really want to.
This is why I work to keep the economic machine working ~ so that even the disasters do not cut deep enough to get to the bone.
russia in 90s was as close to a empire collapsing fast. it was fascinating to watch and eye witness what people did. i saw some very brutal things. saw a line of women waiting on a line to audition to snuff films. for the money. many other brutal things. unimaginable to people who have not eyewitnessed a disaster. the russian author who penned 5 stages of collapse is a great read.
i bought with hard currency, soldiers uniforms and medals they were selling in the darkest corner outside the kremlin. i felt bad, but they begged me for the jacksons and thanked me profusely. my russian pal purchased and took out many religious icons. the saints paintings. illegal to do that, but bribing border guards was easy.
agree. if you are lucky. if we are all unlucky, i could imagine the same stuff i eyewitnessed in 1990s russia happening here. i hope it does not. but i smell some nasty stuff ahead. this is an evil empire collapsing and we have oligarchs now and a mad king who will do anything for a buck and to get off on being cruel. trump ain’t gorby. gorby prevented a civil war by allowing the admirals and generals to sell of the military equipment and weapons and to pocket the money.
agree
I’ve got a solution that precludes the need to exit – Turn the government reins over to an AI and let robot workers do all the work. Everything becomes free.
From a post on another thread:
“A free market excludes those who can’t pay but it does controls costs by reducing demand.”
It also reduces quality. If you come up with an innovative cancer treatment, you have to invest significantly in production, advertisement and distribution. If your costs are high, your only potential market is the wealthy. But are their enough wealthy consumers with cancer to make production even feasibly profitable? If not, the product can never come to market, essentially reducing the real wealth of your customers.
On the other hand, with government subsidizing the costs, the greater market makes it possible to produce the product. Once in production, the producer can reinvest profits and follow the technology curve to reduce costs and prices. Something that doesn’t happen in free market medicine with marginal products.
There is nothing wrong with the government negotiating reasonable prices with a reasonable profit throughout the healthcare system. We all negotiate prices everyday. If a company chooses excess profits, they choose to exclude government based healthcare provision. There is nothing wrong with that. If 95% of your customers are Medicare/Medicaid/VA based, your probably better of shooting for a lower per item profit for a higher overall profit.
The worst case scenario is what we have today: producers charging exorbitant prices with the government forced to pay them. Guys like Mish (and those who share their ideology) will stand firmly in the way of ever getting negotiated, reasonable prices because they will always simply demand and end to government interference whatsoever. While knowing that can never actually happen.
We can’t afford every innovative cancer treatment, nor every novel drug that is only slightly tweaked from prior drugs to create a new patent. Thankfully immense amounts of basic medical research is being done in China and – to a lesser extent – Japan.
Absolutely right. And that can be taken into account in federal price negotiations. If the FDA determines the efficacy rate of your new and improved drug is 1% higher than an already approved drug, then if you want to sell the drug to federal providers we will pay you 1% more. Not enough for you? Then find a way to charge people directly. Everyone’s liberty is maintained.
Well lets start off the morning with honesty- if inflation were measured accurately, and that is a tough ask, we never, ever would be able to hit 2%- getting that out of the way, yes medicare and other government run medical programs will always be the fly in the 2% inflation ointment.
We’re headed back to the bad old days before Obamacare where medical bankruptcies were an integral part of our national identity. Trump voters are getting what they voted for, good and hard.
My wife’s root canal cost over $2000 a year and a half ago. She needs another one and the oral surgeon now wants over $3000. Our November natural gas bill was $247 – last year for the same month it was $167 when we used only slightly less gas. When will the government do something about controlling prices?
They did already; they passed the Big Beautiful Bill, which helped the wealthy through these price increases by giving them a $4.5 trillion tax break. Trump blew all his political capital on this bill, so if you’re not benefiting, it means you’re not important enough to deserve help, and there’s little chance of any change in your status for the next 3 years..
Yes. And don’t forget the increased war budget benefitting the defense contractors.
I paid 7 grand for a bridge out of pocket (plus $700 extraction). At 80 I need to eat. I feel your pain.
I may be flying to Mexico for this type of procedure if this is the cost.
Turkey and India are supposedly good places to go also for medical/dental tourism.
How can there be good solutions for 50 years of fiscal abomination and its cocomitant monetary malpractice? There is nowhere to hide now although the asset markets have masked and forestalled a lot of the anger. What happens if/when a reset comes to them? American inflation hasn’t really hit 2% for a very long time now, even when officially they said they did. Anyone with high-school expected value calcuations could have personalized their own PCE/CPI, multiplying cost increase % x ratio of budgetary makeup and concluded it has been well north of the Fed’s target similar to what Mish did here with health care.
And we can focus on insurance but those costs increases stem first from the provider side. Similarly homeowner’s insurance costs stem from housing and materials inflation allowed to rage for years.
Yet they will cut rates because, well, they told us in advance that was their leaning and we don’t want to disappoint mom and pop, er, Main Street, er….wait, I remember now, they don’t want to disappoint “The Market”. If this market goes the last remaining non-angry cohorts join the disgusted crowd.
Now back to my regularly scheduled programming where I’ll pay $1500 more next year on health insurance, alone significantly greater for me than the official inflation rate, the gyst of Mish’s post. Nothing more need be included in the PCE calculation.
And that’s with them ignoring taxes….
Healthcare may make the 2% target impossible. 2% is a silly target anyway because it is a number picked out of a hat. What is even sillier is to believe that the Fed should keep rates high because of this. Healthcare is a monopolistic racket. No level of interest rates can fix that. Only Congress can fix that, but this Congress, and all those before, is all about corporate money. Malfeasance compounds myopic economic models. But the Fed cannot admit that it is useless to fight this inflation.
It doesn’t take an act of congress. Enforcing 15 USC 1 would be enough. Believe it or not, price fixing and extortion is not the business of “insurance”
It is now.
Price fixing is the business of all businesses. It maximizes shareholder profits. Now, if you follow libertarian economic ideology, when rich investors see a business with outsized profits, they will immediately create competitors to share in those profits, eventually driving down said profits to a fair level over costs. Now, the fact that that has never happened in the real world, is no reason to question the ideology, nor to learn from it and fine tune the theory.
The reason is that libertarian economics does not work as you say. In a libertarian, no rules, economics, rich people see a chance to create a cartel and make even more profits. This is real human behavior vs made up ideals.
i’m a libertarian. but only as a philosophy. i also have studied anthropology since 1978. the problem with libertarians is the human primate species is a social animal. libertarian is more akin to the mythical greek gods. the greeks wrote about them and perhaps strived to be like some, but alas, they knew it was just a fantasy. like libertarianism. i remain a libertarian in spite. it’s an ideal to strive for, against human primates instincts. the human primate sold off their own offspring to become the first form of currency in our history. read graeber, the yale and london school econ, professor, 5000 year history of debt. RIP graeber. all his books are must reads.
“price fixing and extortion is not the business of “insurance””
Really? And yet, insurers keep reaping outsize profits as they keep rising premiums well above inflation. Oh, no, that is free markets …
That’s why they hired Kroll to catch Spitzer with his pants down before he got too far on exposing the prevalence and depth of their kick-backs and bid-rigging about 20 years ago. Nothing since.