3 Compensation and Working Conditions Winter 1997

H

ealth care benefits are a

major component of U.S.

compensation. They

represent a significant expense to

employers and a significant “good”

to employees.1 As such, it is

important to determine which factors

can impact employer health costs.

Among those usually cited are rising

utilization rates, the introduction of

more sophisticated tests and procedures, and increased employer costcontainment efforts.2

 Another

element that may also influence

health care costs is overall health

industry compensation.3

This article examines the links

between employer health costs and

health industry compensation. Wage

and benefit data from the Employment Cost Index (ECI) and data on

medical inflation as measured by the

Consumer Price Index (CPI) are

used to examine this issue. While it

is possible to identify the factors

affecting health costs, it is not

possible to quantify their individual

impact using available BLS data. As

a result, a qualitative discussion

follows.

Wages and benefits are a major

cost in the “production” of medical

services. Consequently, increased

compensation costs could result in

rising health care prices and,

eventually, increased employer

health care costs.4 For this to

happen, two links must be present in

the long run. First, increased

compensation costs should result in

rising medical prices. Second, rising

medical prices should lead to higher

national employer health care costs.

Data from the Bureau of Labor

Statistics (BLS) show that the

change in employer medical costs

and health industry compensation

have followed similar trends over

time. However, many other factors

may also affect this relationship.

These include the productivity of

labor and capital, utilization of

Are Health Industry

Compensation Costs a

Factor Influencing

Employer Health Care

Costs?

BY HILERY SIMPSON

Hilery Simpson is an economist in the Division

of Compensation Data Analysis and Planning,

Bureau of Labor Statistics. Telephone (202) 606-

6207.

Employer health costs follow trends roughly similar to health

industry compensation costs. This relationship holds because

wages comprise a significant portion of total health industry

expenditures.
 Compensation and Working Conditions Winter 1997 4

medical services, and the development of new medical procedures,

among others.

The U.S. private health care

system is built upon employersponsored health insurance. About

90 percent of all private health

insurance plans are employersponsored, covering 61 percent of all

U.S. wage and salary employees.5

With a private sector annual expenditure of $313.3 billion, health

insurance is a significant cost to

employers and covers a majority of

workers.6 As a result, changes in

health care costs and benefits are

closely watched by both employers

and employees, as well as by those

who set policy at all levels of

government.

The Employment Cost Index

The ECI, published quarterly,

measures the rate of change in

employee compensation including

wages, salaries, and the employer’s

cost of providing benefits. Two

characteristics distinguish the ECI

from other compensation surveys.

First, it measures total employee

compensation for all establishments

and occupations in both the private

nonfarm and public sectors.7

Second, the ECI calculates the

change in the cost of employing a

fixed set of labor inputs. This

eliminates changes in the occupational mix of the labor force over

time.

The ECI’s benefit indexes, like

those for wages and salaries, are

fixed-weight Laspeyres measures of

the change in the cost of employing

a fixed set of labor inputs.8 The

fixed weights, currently industry and

occupational employment counts

from the 1990 Census, ensure that

the changes measured by the ECI are

unaffected by employment shifts

among industries and occupations.

Using the Laspeyres index

formula, the ECI uses a fixed basket

of labor services priced from quarter

to quarter. However, it does not fix

the basket of services provided to

employees within each benefit type

because the ECI is not a measure of

employee income-in-kind from labor. 9

Consequently, the ECI measures the

cost and incidence of 23 benefits

(including health insurance plans)

offered to employees at employers’

expense, whose provisions can

change over time.10

Health care costs, as measured by

the ECI, can change in three ways.

First, employer-paid health insurance premiums can increase or

decrease just as utilization within

self-insured plans can change.

Second, the establishment can add or

eliminate a plan, possibly forcing

employees to change health care

providers. Third, employee participation in health plans can change

when plan provisions or employee

contribution requirements change.

Changes in health care plan costs

usually are not directly correlated

with changes in wages and salaries.

In most cases, the cost of a plan is

the same regardless of an employee’s

earnings.11 Further, there commonly

is a lag between the actual change in

health costs and the subsequent

change in plan costs incurred by

employers and reported to the

Bureau.

Trends in compensation costs

for health industry workers

Since 1986, annual percent increases in compensation costs

(wages and salaries, and benefits) for

workers employed in health service

establishments have ranged from a

high of 7.1 percent at the start of

1990 to a low of 1.8 percent for the

year ending December 1996. As this

range indicates, the rate of increase

in compensation costs fluctuated

widely.

Data from the ECI show that

between 1986 and 1993, change in

compensation costs for workers in

the health care industry grew faster,

on average, than for all civilian

workers.12 (See chart 1.) Health

services compensation grew at an

average annual rate of 5.3 percent

compared to 4.3 percent for all

civilian workers. Since 1994,

however, this trend has reversed;

average compensation cost increases

for health workers have grown more

slowly than they have for all civilian

workers. Data from the first quarter

of 1997, show a continuation of this

trend; health care compensation is

increasing at about 2 percent

annually, compared to about 3

percent for civilian compensation.

Factors affecting health industry

compensation

A large portion of total health

care industry expenditures goes

toward compensation for its workers.

Consequently, compensation costs

are, by far, the largest expenditure

made by establishments in the health

care industry.

There are many factors affecting

health care compensation. First, real

wages in the health care industry

should rise in the short run if

consumer demand for medical care

increases, all else being equal.13

According to the Health Care

Finance Administration National

Health Accounts, national private

expenditures for health care have

increased, on average, just under 10

percent annually since 1986. From

1990 to 1993, total employment in

health care services increased from

about 9.1 million to 10.2 million. If

rising expenditures and total

industry employments are used as

general indicators of demand, then a

fair conclusion is that the demand

for health services has increased.

Second, health care wages should

rise in the short run if workers

become more productive, all else

being equal. While measuring

productivity in the service sector is

difficult at best, anecdotal evidence

indicates that worker productivity in

the health care industry has increased. While there are many

factors that can affect productivity,

technical changes in health care

delivery, particularly the creation of

Health Maintenance Organizations

(HMOs) and Preferred Provider

Organizations (PPOs) are the most

likely cause of increased productivity

in the industry.

14
5 Compensation and Working Conditions Winter 1997

Other important factors affect

wages in the health care sector.

These include the industry’s desire

for increased profits, introduction of

new technologies, changing competition in a marketplace, and the

supply of skilled workers. These six

factors together have a significant

effect on compensation in the health

industry.

Health care prices: The Consumer Price Index

The Consumer Price Index (CPI)

measures the average change in

prices paid by urban consumers for a

fixed market basket of goods and

services. Price changes are calculated by repricing essentially the

same group of goods and services at

regular intervals and comparing

aggregate costs from a selected base

period. The medical care component

of the CPI is a measure of change in

the price of health care.

Medical goods and services,

including health insurance, make up

just under 7 percent of the CPI market

basket for all goods and services.15

Price changes in health insurance

premiums are calculated monthly

from the various price movements of

goods and services that are covered by

health insurance.16

Since 1986, the change in the

price of medical care has usually

outpaced the overall inflation rate

for all goods and services. However,

starting in 1992, the gap between

medical care inflation and overall

price change has disappeared.17 In

1991 and 1992, prices for medical

care grew over 4 percent per year

faster than other prices as measured

by the CPI. By 1995, the difference

in medical and non-medical inflation

narrowed to less than 2 percentage

points. In the 6 months ending June

1996, medical prices actually grew

slower than non-medical prices for

the first time in over a decade.

Health industry compensation

costs and medical inflation:

A comparison

Even though the average rate of

increases in medical prices was

greater than health industry compensation between 1986 and 1996, the

pace of change in both data series

followed similar patterns. (See

chart 2.) Between 1988 and 1990,

both series increased. Moreover,

between 1990 and 1994, both series

decreased.18 Since a majority of

health care industry expenditures

result from compensation costs, a

relationship between health industry

compensation and medical inflation

is not unexpected.

Trends in employer health care

costs

Health care costs have grown

more rapidly than wages or any

other benefit over the past decade.

From the time the Bureau started

collecting employer cost data for

wages and salaries, and benefits, the

proportion of total compensation

costs for employee benefits has

slowly risen. Between 1977 and

1996, benefits, as a portion of total

compensation, rose from 25.2

percent to 28.1 percent. (See chart

3.) This increase in benefits is

directly linked to rising health care

costs.19 When health insurance costs

are excluded from total benefit costs,

the change in costs of total benefits

closely resembles the rate of change

in civilian wages and salaries.20

Between 1985 and 1996, health

care costs increased at a greater

average annual rate than all other

benefit costs. After an increase

between 1987 and 1989, the rate of

increase in employer health care

costs decreased every year through

1995. Over the past 2 years,

however, the cost of health care

benefits has declined more than

other benefit costs. Except for the

September 1996 quarter, health care

benefit costs have remained relatively stable, while the cost of all

other benefits has increased roughly

at the same pace as wages.

Not only have employer health

care costs usually grown faster than

other benefits, they have also

exhibited greater long-term volatility. Since 1985, annual increases in

the employer benefits cost, excluding

health care, ranged from roughly 2

to 6 percent. (See chart 4.) In

comparison, the annual percent

change in health care costs has risen

to as much as 14.7 percent and

fallen as much as 0.3 percent.

Employer cost-containment

efforts

Another factor that affects health

care costs is employer cost-containment efforts. These efforts exert a

downward pressure on employers’

medical care costs.

Reversing a 5-year trend, employer health care costs since 1994,

as measured by the ECI, have

increased at a slower rate than

medical inflation. (See chart 5.)

The reduction in the growth of

employer health care costs is most

often attributed to expanded employer cost-containment efforts.21

Economists have identified

several methods employers use in

containing health care costs. These

include passing health care costs on

to employees, moving away from

traditional fee-for-service plans to

less expensive HMOs and PPOs, and

changing the existing plan design.22

Medical prices and employer

health care costs: A comparison

The change in medical prices has

followed a pattern similar to that for

employer health care costs. When

the price of health services and products grew faster than the average

inflation rate, employer costs for

health care benefits grew faster than

other compensation costs. Similarly,

when the growth in medical prices

slowed more than the inflation rate,

the growth in employer health care

costs fell below the average growth

rate for all other benefits.

Using the change in the CPI-U

for medical care, lagged 1 year, and

the ECI for health insurance, the two

data sets, with several exceptions,

follow similar trends. 23 (See chart

5.) Two conclusions are apparent

when reviewing these data. First,
 Compensation and Working Conditions Winter 1997 6

the employer cost data are more

volatile than medical inflation data.

Second, during certain periods, the

two data series moved inversely. For

example, between 1989 and 1992,

the rate of increase in employer costs

was declining while medical inflation was increasing. This inverse

movement is explained by factors

(other than medical prices) affecting

employer health costs, such as costcontainment measures. As such, it

is to be expected that the ECI might

not move in a 1:1 relationship to

medical inflation. While this

graphical evidence appears to be less

compelling than the comparison

between health industry compensation and health industry prices, the

two data series move consistently

enough so that a relationship does

appear to exist.

Analysis

What is the connection between

health industry compensation and

employer health care costs? While it

appears logical that an increase in

health industry compensation costs

will lead to higher prices charged to

employers and this, in turn, will

result in higher employer health care

costs, as seen earlier, there are many

intervening factors. For example,

health care providers may absorb all

or part of increased compensation

costs under certain market conditions, or increased employee

productivity can mitigate the change

in costs incurred by health care

providers and the change in the

prices they charge for their services.

In addition, employers do not always

have to accept higher health care

costs; they can change health care

plans to emphasize cost-containment

measures, reduce the benefits

provided in their current health care

plan, or even pass the increased

costs on to their employees. When

the impact of health insurance

companies, acting as a middleman

between employers and health care

providers, is included, the relationship between health industry

compensation costs and employer

health costs becomes less direct.

Notwithstanding these factors, the

data show a broad, positive correlation between health care compensation costs and employer health

insurance costs. (See chart 6.) In

1988 and early 1989, employer

health insurance costs and compensation costs increased. Soon

thereafter, the rate of increase in

both wages and costs declined,

continuing through 1995. However,

in 1996, wage increases continued to

decrease slightly, while health care

cost increases grew.

The discrepancies between health

industry compensation costs and

employer costs are expected. Just as

employer health costs and medical

inflation do not move in a 1:1

relationship, neither do compensation and costs move in lockstep. As

explained earlier, factors other than

health industry compensation also

affect employer health costs.

Moreover, these employer health

costs are more volatile than health

care workers’ compensation costs.

(See chart 5.) Between early 1986

and the first quarter of 1988, the

percent change between compensation and costs were similar. Following this period, health care costs rose

significantly, increasing at a rate of

14.7 percent annually in the fourth

quarter of 1988.24 Health care costs

continued to rise at a double digit

pace for the next 31⁄4 years. Increases in compensation also became

larger over this time period, but at a

slower pace. While the annual

percent change in health care costs

increased from 3.9 percent in the

first quarter of 1986 to 14.7 percent

roughly 3 years later, the annual

change in compensation costs only

increased from 3.7 percent to 6.5

percent.

Conclusion

Changes in health industry wages

appear to be one of many factors

influencing employer health care

costs. The data show that employer

health insurance costs follow

roughly similar trends to those of

health industry wages. This relationship holds because wages

comprise a significant portion of

health industry expenditures.

Technical note

In order to mathematically test

the relationship in the time series

data presented in certain charts,

correlation tests were completed.

The correlation calculation generates

the covariance of two data sets

divided by the product of their

standard deviations. In each of the

charts tested, a significant positive

correlation was found at the 95

percent confidence level.

The correlation between the CPIU for medical care and the ECI for

compensation costs in the health

care industry was found to be .8868.

(See chart 2.) This shows that the

two data sets have a strong tendency

to move together over time.

Similar results were found for

employer health care costs and

compensation costs in the health

care industry, with a positive

correlation of .8736. (See chart 6.)

Employer health care costs and all

other benefit costs were also significant, with a correlation rate of .7319.

(See chart 4.) The CPI for medical

care (lagged 1 year) and the ECI for

health insurance were correlated at

.6335. (See chart 5.)
7 Compensation and Working Conditions Winter 1997

1

 A 1996 survey conducted by the Employee

Benefit Research Institute and the Gallop Organization, Inc., found that 64 percent of all employees value their health benefits more than any other

benefit.

2

 See, for example, “Hospital Costs, Adoption

of Technology Drives Cost Growth,” General Accounting Office, September 1992.

3

 This article uses the Employment Cost Index for the health services industry as a measure

of health industry compensation. Health services

include workers in Standard Industrial Classification (SIC) Major Group 80 and include the following types of establishments: Doctor’s offices

(8011 - 8049), nursing and personal care facilities (8051 - 8059), hospitals (8062 - 8069), medical and dental laboratories (8071 - 8072), and

other miscellaneous health services (8082 - 8099).

4 By isolating a particular factor, it is easier to

identify the specific impact it can have on health

industry compensation costs. While not a “real

world” condition, it is a good way to examine cause

and effect relationships in the health care sector as

well as the overall economy.

5

 Employee Benefits Research Institute,

“Sources of Health Insurance Characteristics of

the Uninsured: Analysis of the March 1994 Current Population Survey,” EBRI Issue Brief Number 170, February 1996.

6

 Katharine R. Levit, et al., “National Health

Care Expenditures, 1994,” Health Care Financing Review, Spring 1996, pp. 205-206. Also see

Michael Bucci and Robert Grant, “Health Insurance: Employer Offerings and Employee Choice

in Small Private Establishments,” Compensation

and Working Conditions, August 1994, pp. 1-3.

7

 Coverage of the private sector is limited to

the private nonfarm economy, excluding private

household workers. Public sector coverage includes employees of State and local governments,

but excludes workers in the Federal Government.

8

 For an explanation of the ECI index computation method, see BLS Handbook of Methods,

Bulletin 2490, 1997, Bureau of Labor Statistics,

pp.61-62.

9

 The difference in treatment of benefit provisions between the ECI and a consumption cost

index might be illustrated by an example. A decline in health insurance premium cost attributed

to a decline in coverage of illnesses would be properly registered in the ECI as a cost decrease for

procuring labor services. The same phenomenon

in a broad consumption cost index such as the Personal Consumption Expenditures (PCE) implicit

deflator might not be reflected as a price decline

because the quality of insurance coverage to the

consumer has concomitantly declined. Any quality-adjusted consumption price decline would certainly not be as great as the decline in employers’

premium costs in this case. We do not mention

the CPI here because, unlike the PCE deflator, it

does not cover, as a general rule, consumption of

services provided at substantially no cost to the

household, such as employer-provided benefits.

10 The ECI measures employer costs for the

following benefit categories: Legally-required

benefits (Social Security and Medicare, Workers’

Compensation, Federal and State unemployment

insurance, among others), insurances (health, life,

short-term disability, and long-term disability),

paid leave (vacations, sick leave, holidays, and

other leave), retirement and savings plans (defined

benefit and defined compensation plans), supplemental pay (shift differentials, overtime, and nonproduction bonuses such as lump-sum payments

provided in lieu of wage increases), and other benefits (severance pay and supplemental unemployment insurance). The following table shows the

cost per hour worked for components of compensation, and costs as a percentage of compensation,

private industry workers, March 1996:

Total compensation ....... $17.10 100.0

Wages and

 salaries...................... 12.58 71.9

Total benefits .............. 4.91 28.4

Legally-required ...... 1.59 9.3

 Health

 insurance ............. 1.14 6.5

Paid leave ................ 1.12 6.4

Retirement

 savings................... .55 3.1

Supplemental pay .... .49 2.8

Other benefits .......... .03 .2

11 The incidence of health care plans, however,

is correlated with earnings. As earnings increase,

so too does the chance of being covered by a health

care plan. See, for example, Albert E. Schwenk

and William R. Bailey, “Employer Expenditures

for Private Retirement and Insurance Plans,”

Monthly Labor Review, July 1972, pp. 15-19.

12 All civilian worker data include private nonfarm and State and local government employees,

excluding sales occupations. Sales workers were

excluded because commission income is variable

and increases the volatility in civilian worker compensation data.

13 See, for example, Paul J. Feldstein, Health

Care Economics, John Wiley and Sons, 1988, pp.

40 and 416 for an analysis of how the demand for

health care has affected the wages of registered

nurses.

14 Martin N. Baily and Alan M. Garber,

“Health Care Productivity,” Micro Brookings

Papers, June 1997, p. 45. HMOs provide a fixed

set of medical services for a prepaid fee and generally emphasize preventative care and early intervention. PPOs, on the other hand, are contractual agreements, generally between health care

providers and an employer or insurance company,

to provide fee-for-service medical care, usually at

a discount. While PPO subscribers usually have

the option of going outside the list of “preferred”

doctors (at a lower reimbursement rate), HMOs

usually will not reimburse their members if medical treatment is received from a non-authorized

health care provider in non-emergency situations.

Increased efficiency is gained through these managed care plans in a variety of ways; the following three are presented as examples. First, large

organizations can negotiate lower prices for prescription drugs, hospital services, and other medical goods. Second, by bringing doctors together,

the cost of overhead is spread over many more

patients. Third, expensive outside tests are often

completed in-house, thus reducing the cost to the

health provider.

15 The CPI does not include employer-paid

health insurance premiums or government-paid

health care; these are considered part of consumers’ incomes and not their expenditures. As such,

the share of medical services in the CPI is smaller

than its share of the gross domestic product and

other national account measures.

16 The BLS does not publish indexes for health

insurance premiums because it employs an indirect method to measure price change for health

insurance. This indirect approach reflects estimates of the impact on premium levels of: 1)

Changes in the price of medical care items covered by health insurance policies; 2) changes in

the cost of administering the policies; and 3)

changes in the cost of maintaining reserves and,

as appropriate, profits. It excludes changes resulting from modifications in policy benefits and increased or decreased use of medical insurance.

Increased use is an increase in the quantity of

medical insurance consumed, and not an increase

in its price. For more information on how the CPI

measures changes in health care costs, see BLS

Handbook of Methods, Bulletin 2414, Bureau of

Labor Statistics,1992, pp. 176-180 and 195 and

the U.S. Department of Labor Program Highlights, “How BLS Measures Price Change for

Medical Care Services in the Consumer Price Index,” Fact Sheet No. BLS 93-4, Bureau of Labor

Statistics, July 1993.

17 See “A Look at Employer’s Costs of Providing Health Benefits,” Office of the Chief

Economist, U.S. Department of Labor, July 31,

1996, p. 5, for a further discussion.

18 Correlation calculations found significant

positive correlation between the two series. (See

Technical Note at end of article for further discussion.) While the change in the rate of growth between the two data series appears to be strongly

correlated, it should be noted that the data, by

themselves, do not prove that a change in health

industry compensation costs is the primary cause

for a similar change in medical prices.

19 While benefits as a portion of total compensation has increased over time, civilian wages are

now growing faster than benefits. This is a result

of the recent slowdown in health costs and the corresponding slowdown in the increase of total benefit costs.

20 One reason health care costs have risen more

than all other benefits combined is because the cost

of most non-health benefits are tied to wages.

Therefore, when wages increase, most benefit costs

(e.g. legally-required, paid leave, etc.) will increase

in a 1:1 relationship.

21 “A Look at Employers’ Costs of Providing

Health Benefits,” Office of the Chief Economist,

U.S. Department of Labor, July 1996.

22 Stephanie L. Hyland, “Health Care Benefits

Show Cost-containment Strategies,” Monthly Labor Review, February 1992, pp. 42-43.

23 This analysis is from Al Schwenk, “Trends

in Health Insurance Costs,” Compensation and

Working Conditions, December 1996, pp. 31-33.

The change in the ECI health insurance costs

showed a closer relation to the CPI for medical

care lagged 1 year than to the concurrent change

in the CPI for medical care. The most plausible

reason for this lag is that CPI data are collected

directly from the health care providers while the

ECI collects data from employers who must first

be billed by the provider. Peter K. Reilly, a benCompensation

component

Cost per

hour

worked

Percent of

compensation

—ENDNOTES—
 Compensation and Working Conditions Winter 1997 8

efits actuary, believes cost increases lead premium

increases by 18 months: however, increasing the

lag time to 18 and 24 months did not materially

affect the relationship depicted in chart 5. While

the change in the rate of growth between the two

data series appear to be strongly correlated, it

—ENDNOTES—

should be noted that the data, by themselves, do

not prove that a change in medical prices is the

cause for a similar change in employer health care

prices.

24 These changes in health insurance costs are

unpublished estimates. Employer nonresponse for

health insurance is higher than for other benefit

items; as a result, the health insurance index rests

on fewer observations than expected from the survey design. Variance estimates for the health insurance index are under development at the Bureau but not yet available, which means that there

is no basis for assessing the index’s precision.
9 Compensation and Working Conditions Winter 1997

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

1

2

3

4

5

6

7

8

12-month percent change

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

0

2

4

6

8

10

12-month percent change

Chart 1. Percent change in the Employment Cost Index for civilian worker compensation (less sales

occupations) and health industry compensation, 1985-96

Health industry compensation

Civilian workers' compensation

CPI-U for medical care prices

Health industry compensation costs

Chart 2. Percent change in the CPI-U for medical care and the ECI for compensation costs in the

health care industry, 1986-96

12-month percent change

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

12-month percent change

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
 Compensation and Working Conditions Winter 1997 10

NOTE: Data are fr om Employer Exp enditur e for Employee Co mpensa tion 

Sur vey (1977 ) and the Employmen t Costs Index (1996 ).

4.0 %

74.8 %

21.2 %

1977

6.5 %

71.9 %

21.6 %

1996

Health and insurance Wages and salaries Al l other benefit s

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

-5

0

5

10

15

20

12-month percent change

Chart 3. Percent of total compensation by health and insurance benefits, wages and salaries, and all

other benefits, 1977 and 1996

NOTE: Data are from Employer Expenditure for Employee Compensation Survey (1977) and the Employment Costs

Index (1996).

Health and insurance Wages and salaries All other benefits

Employer health care costs

Benefit costs less health costs

Chart 4. Percent change in the Employment Cost Index for employer health care costs and all other

benefit costs, 1985-96

12-month percent change

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

1977 1996
11 Compensation and Working Conditions Winter 1997

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

-5

0

5

10

15

20

12-month percent change

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

-5

0

5

10

15

20

12-month percent change

Employer health care costs

Chart 5. Percent change in the Consumer Price Index for medical care (lagged 1 year) and

Employment Cost Index for employer health care costs, 1985-96

Chart 6. Percent change in the Employment Cost Index for employer health care costs and

compensation costs in the health care industry, 1985-96

Health industry compensation costs

Employer health care costs

CPI for medical care, lagged

12-month percent change

12-month percent change

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996