Healthcare

As Congress considers a year-end spending bill, it faces a decision that will have a meaningful effect on inflation: whether or not to extend across-the-board Medicare reimbursement rates.

The White House and Congress should consider an “all-of-the-above” approach oriented around three objectives: (1) investments where productive capacity; (2) targeted policies for reducing sectoral demand; and (3) policies that facilitate greater competition and technological diffusion.

Now is the time for the Biden administration to think hard about how to encourage greater efficiency for the already elevated set of healthcare costs that the government and the private sector finance in this country.

Healthcare policy interventions could provide downward pressure on core PCE both in 2022 and in the years ahead. Given the salience of inflation, disinflationary healthcare policies should be a key priority for Congress and the Biden Administration alike.