How the Consumer Price Index Impacts Employee Benefits

The consumer price index (CPI) tracks inflation, with its medical care index measuring shifts in health care costs. Recent data shows 11% of U.S. adults still lack access to quality care, and over a third feel they don’t get value for what they pay. While the medical care index rose 3% in May 2025, actual employer costs climbed 7–8%. Monitoring medical inflation is key to managing benefit costs and adapting to changing market conditions.

Overview of the CPI

The CPI, calculated by the U.S. Bureau of Labor Statistics (BLS), tracks the cost of goods and services, including medical care, for urban consumers. It shows how much consumers are spending and it’s a key measure of inflation used to guide economic decisions by government, businesses, and individuals. The CPI is also used for policy, wages, and benefit adjustments.

The Medical Care Index

The medical care index tracks trends in healthcare prices, including hospital, medical, and drug costs. It’s divided into categories and subjections:

• Medical care services
  • Professional services (doctor services, dental services, eye care, etc.)
  • Hospital and related services (inpatient and outpatient hospital services, nursing home, adult day care, etc.)
  • Health insurance
• Medical care commodities
  • Prescription and nonprescription drugs
  • Medical equipment and supplies

Medical care services have the largest weight in the medical care index, which tracks out-of-pocket spending, including premiums consumers pay directly. Employer-paid premiums and tax-funded care are excluded, but total provider reimbursements are reflected in price changes.

Employer Considerations

Understanding the medical care index of the CPI can help employers with the following:

• Managing health care costs – The CPI medical care index helps employers track health care cost trends and budget for employee benefits.
• Strategizing employee benefits and plan design – Employers can use CPI data to adjust benefits and stay competitive, such as enhancing coverage or wellness programs when medical costs rise.
• Negotiating with health care providers – Understanding CPI and medical inflation empowers employers to negotiate better rates and achieve cost savings.
• Educating employees – Sharing CPI trends with employees increases transparency, boosts health literacy, and helps control costs.

Conclusion

The CPI medical care index helps employers make informed, strategic benefits decisions for their organization and employees. Download the bulletin for more details.