level, has averaged 0.15 percent a year higher growth than the Fisher, although the differences varied from year to year, reaching 0.5 percent in one year.

The domain of the NIPA index includes all medical consumption expenditures, including those paid for by Medicare, Medicaid, and employer-paid health insurance, which currently account for 17.5 percent of the weight in the index. The CPI only includes consumer out-of-pocket costs, which represent about 6.0 percent of the weight in that index. In most (but not all) years of the past several decades, the price of medical care has been rising faster than the average for other consumer goods and services, raising the NIPA inflation rate above the CPI rate. However, the NIPA (atypically) uses not the CPI but the PPI index for hospital service inflation, which is differently constructed and shows a lower rate of increase. On balance, the treatment of medical care costs in the NIPA index raises its measure of consumer goods inflation slightly relative to the CPI rate in most years. As a measure of inflation (as opposed to an index used for compensation purposes) the NIPA estimate, which comes closer to covering all medical service prices, is the more relevant one.

Table 7-2 compares the annual inflation rates of three alternative indexes since 1991: the NIPA GDP and personal consumption expenditure (PCE) price indexes and the BLS research index (CPI-U-RS) that extends backward in time the major revisions in CPI measurement techniques that have been introduced over the last several decades. (Many of these changes had been incorporated earlier in the NIPA indexes, and several others were extended back to 1978 in the latest NIPA revisions.)

With the exception of 1996, the differences between the two measures of consumer goods inflation are small. There are a number of conceptual differences

TABLE 7-2 Comparison of NIPA and CPI Indexes, 1991-2000 (percent change)

Year

NIPA, GDP

NIPA, PCE

CPI-U-RS

1991

3.6

3.8

3.7

1992

2.4

3.1

2.7

1993

2.4

2.4

2.6

1994

2.1

2.0

2.2

1995

2.2

2.3

2.5

1996

1.9

2.1

2.7

1997

1.9

1.9

2.2

1998

1.2

1.1

1.4

1999

1.4

1.6

2.0

2000

2.3

2.7

3.4

NOTES: NIPA, National Income Product Accounts; GDP, gross domestic product; PCE, personal consumption expenditures; CPI-U-RS, research series using the urban consumer price index.



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