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How much do Medicare cuts reduce inflation?

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Abstract

Because the health sector makes up a large share of the U.S. economy, widespread price changes for medical services can impact overall inflation significantly. Cuts to public health-care spending spill over directly and indirectly to private spending. A recent estimate suggests the full effect of the Medicare payment cuts from the 2011 Budget Control Act resulted in a decline of 0.24 percentage point in the overall personal consumption expenditures price index. This is over twice the expected drop if private-sector spillovers are not included.

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  • Jeffrey Clemens & Joshua D. Gottlieb & Adam Hale Shapiro, 2014. "How much do Medicare cuts reduce inflation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00030
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    1. Jeffrey Clemens & Joshua D. Gottlieb, 2017. "In the Shadow of a Giant: Medicare’s Influence on Private Physician Payments," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 1-39.
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    1. Jeffrey Clemens & Joshua D. Gottlieb & Adam Hale Shapiro, 2016. "Medicare payment cuts continue to restrain inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    2. Jeffrey Clemens & Joshua D. Gottlieb, 2017. "In the Shadow of a Giant: Medicare’s Influence on Private Physician Payments," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 1-39.
    3. Abe Dunn & Adam Hale Shapiro, 2018. "Physician Competition and the Provision of Care: Evidence from Heart Attacks," American Journal of Health Economics, MIT Press, vol. 4(2), pages 226-261, Spring.
    4. Tim Mahedy & Adam Hale Shapiro, 2017. "What's Down with Inflation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    5. Dunn, Abe & Shapiro, Adam Hale, 2015. "Physician payments under health care reform," Journal of Health Economics, Elsevier, vol. 39(C), pages 89-105.
    6. John C. Williams, 2014. "Navigating toward normal: the future for policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    7. Adam Hale Shapiro, 2018. "Has Inflation Sustainably Reached Target?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    8. Adam Hale Shapiro, "undated". "Decomposing Supply and Demand Driven Inflation," RBA Annual Conference Papers acp2023-03, Reserve Bank of Australia, revised Nov 2023.
    9. Jeffrey Clemens & Joshua D. Gottlieb & Tímea Laura Molnár, 2015. "The Anatomy of Physician Payments: Contracting Subject to Complexity," NBER Working Papers 21642, National Bureau of Economic Research, Inc.
    10. Adam Hale Shapiro, 2015. "Did Massachusetts health-care reform affect prices?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    11. Adam Hale Shapiro, 2022. "Decomposing Supply and Demand Driven Inflation," Working Paper Series 2022-18, Federal Reserve Bank of San Francisco.

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