Key Insights from NCCI’s Latest Medical Inflation Report

1. Inflation moderated in 2024, though progress towards the Fed’s 2% target slowed. Prices for all items increased by 2.9% from the previous year while core prices rose by 3.2%. 

Core inflation remained steady, growing just above 3% for most of the year. Housing and rents remained the most significant contributors to core inflation. 

As we head into 2025, inflation will remain an uncertainty as fiscal policy changes may complicate the Fed’s efforts to continue to bring inflation down.

2. Medical price inflation moderated more sharply than overall inflation in 2024. All three high-frequency indices that we use to track medical prices softened in the second half of the year.The Centers for Medicare and Medicaid Services forecast that prices for the Personal Health Care index will rise 2.6% in 2025, suggesting the recent softening in medical prices may continue through this year.
3. NCCI’s Workers Compensation Weighted Medical Price Index (WCWMI) grew by 2.3% in 2024 compared to 2.9% in 2023.The WCWMI trended similarly to other high-frequency medical price indices, though slightly lower due to different weights. Price growth was firm in the first half of the year before softening in the second half of the year.As we think about medical price inflation in 2025, several key trends from 2024 will be worth watching.
4. Physician services, the largest category of spend in workers compensation, saw price growth above longer-term averages in 2024.This price growth was driven by increases in non-Medicare prices offsetting a small decline in Medicare prices. This trend will be one we watch in 2025 as it has implications for prices in fee schedule and non-fee schedule states.
5. In the second half of 2024, facilities prices moderated, marking another key trend we will be watching in 2025. Longer-term trends in prices for inpatient and outpatient services suggest this softening may be temporary.

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