City leads the U.S. in inflation

August 13, 1994|By John E. Woodruff | John E. Woodruff,Sun Staff Writer

Surges in essential family expenses such as food, medical services and housing gave the Baltimore area the fastest inflation rate of among U.S. metropolitan areas in the last two months, the government reported yesterday.

The broad-based increase in Maryland consumer prices -- 1.6 percent over the two months, compared with 0.6 percent for the United States -- comes after nearly four years during which Maryland prices had risen far more slowly than the nation. The leap was the biggest in the Baltimore area since the fall of 1990.

"It was a case where almost everything came together and went up at the same time in Baltimore, and the only category that declined was apparel, which always goes down in July," said Maureen Greene, a spokeswoman for the Philadelphia office of the U.S. Bureau of Labor Statistics, which compiles the figures.

Most troubling to several analysts was that medical costs for Maryland consumers rose 2.8 percent over the two months, more than triple the national rate.

"Medical care costs in Maryland have been completely out of control for a long time, and they have more than tripled in the last 10 years," said Charles McMillion, president of MBG Information Services, a Washington consulting firm.

To a considerable extent, economists said, the overall surge in Baltimore-area prices was to be expected, now that Maryland's economy is in its second year of recovery.

"We are just getting into the consumer spending recovery that the rest of the country has been having for some time, so now retailers and suppliers are playing catch-up, trying to raise prices in improving times to get back costs that have been increasing for some time," said Michael A. Conte, director of regional economic studies for the University of Baltimore.

The continuing escalation in medical costs isn't as benign, he said. For the 12 months ended in July, Maryland's health care costs went up 12.3 percent, compared with 4.6 percent for the United States.

"I think the implication of these medical cost figures is that one day soon someone in Annapolis is going to have to rethink Maryland's decision to set itself so far apart from the national health care cost regimen," Mr. Conte said.

Maryland is the only state that has succeeded in exempting itself from federal Medicare cost regulations. In addition, hospital charges in Maryland are regulated by a Health Services Cost Review Commission.

"Maryland chose to go for both maximum quality and maximum access, and to put less emphasis on cost containment, and these figures are likely to force some reconsideration of those priorities," Mr. Conte said.

As managed-care providers such as health-maintenance organizations have gained prominence, national health care cost increases have moderated in the past two years, but increases in Maryland have not, Mr. Conte and Mr. McMillion said.

However, Robert Murray, executive director of the Health Services Cost Review Commission, says the rates it has influence over are not rising as rapidly as before. In the early months of 1994, the commission was granting hospital rate increases of 6 percent to 7 percent annually, but that has dropped to 4 percent to 5 percent for the past two months.

Only housing-related costs, up 2.9 percent for the two months, outstripped health care price inflation in Baltimore.

In the food and beverage category, up by 1.3 percent, most of the increase was accounted for by an unseasonable rise in the prices for fresh fruit and vegetables, which surged 6.4 percent for the two months and were up by 24.1 percent over July 1993.

Within the Bureau of Labor Statistics' major categories were sub-categories where prices did not rise or actually declined -- mainly in very competitive fields.

"Housing price increases, if you take out electricity, were relatively moderate, and prices of a lot of highly discretionary items, such as restaurant meals, actually went down," Mr. McMillion said.

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