The specter of deflation — everywhere but health

Merrill Goozner is an award-winning journalist and author of “The $800 Million Pill: The Truth Behind the Cost of New Drugs” who writes regularly at Gooznews.com.

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Consumer prices have fallen 0.4 percent in the past year, the first time since 1955 that retail prices have fallen year over year, according to the latest data from the Bureau of Labor Statistics.

Is this a harbinger of the future, where money gets tighter and tighter, prices fall and anyone with debts, including anyone with a home mortgage, is threatened with financial insolvency? That’s a Great Depression scenario.

Meanwhile, the Wall Street Journal reports that drug companies and hospitals are bucking the deflationary trend by raising prices to boost sales and profits as fewer people use their services due to the recession.

Do we need any more proof that the phrase “health care marketplace” is an oxymoron? Looks more like administered prices by monopolists to me.

Analysts quoted in the story suggested the price hikes were either put in place by hospitals before the current downturn or were an effort by drug companies to wring as much sales as possible from existing drugs before reform-driven cost-cutting kicks in.

There’s something to that. The last time health care spending rose at about the same pace as the rest of the economy was in 1994-5, the years that coincided with and shortly followed the Clinton administration’s failed effort to enact health care reform. The mere threat of reform, coupled with this severe economic downturn, will undoubtedly moderate providers’ ability to exact exorbitant price and volume increases over the next few years.