Airfares have been taking off

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Kimberly Adams (0:31)

The higher prices driving the Fed's push for higher interest rates and Medicaid cuts are starting to show up in state budgets and people's lives.

From Marketplace in Washington, I'm Kimberly Adams. US central bankers voted unanimously yesterday to increase borrowing costs by a quarter of a percentage point. It's the first rate hike in three years. Federal Reserve Chairman Kevin Warsh didn't say exactly how high interest rates will have to go, but he did make clear at his press conference that the Fed has work to do.

Kevin Warsh (1:03)

For more than five years, inflation has been running above target.

So our predominant focus is on the price stability side of our mandate. The plain fact is that inflation is too high and has been for too long.

Kimberly Adams (1:19)

Among the fastest rising prices in our economy right now, airline fares. They were up 23% year over year in August, according to the latest Consumer Price Index. And jet fuel prices pushed higher by the war in Iran are just part of the story, as Marketplace's Henry Epp reports.

Henry Epp (1:37)

After a short reprieve, the price of jet fuel has been rising since July. And a few weeks ago, Scott Kirby, the CEO of United Airlines, told CNBC he expects fuel prices to stay elevated into next year.

SPEAKER_1 (1:50)

The good news is, I think that we're going to be able to pass all of that on.

Henry Epp (1:55)

As in, pass it on to customers, because they can. Demand for plane tickets has not slowed down, even with rising fares. It's especially strong for premium seats, first class or economy plus, says Meghna Maharishi, an airline reporter with the travel industry publication Skift.

Meghna Maharishi (2:12)

Premium has been really resilient, so it doesn't really seem like higher air fares have really made an impact on that sort of spending.

Henry Epp (2:22)

Airlines are expanding their premium seating and taking seats out of the main cabin, says Henry Hardeweld, head of Atmosphere Research Group.

Henry Hardeweld (2:30)

And if there are fewer regular coach seats available, it's a hunger game situation. You've got more people clamoring for those seats. It gives airlines less incentive to discount those seats anymore than they feel is necessary.

Henry Epp (2:42)

Also pushing up prices of economy tickets, Hardeweld says, the demise of Spirit Airlines, which offered discount fares.

Henry Hardeweld (2:49)

Absent Spirit, there's less price competition.

Henry Epp (2:52)

Which gives other airlines more power to raise fares. I'm Henry Epp for Marketplace.

Kimberly Adams (3:14)

Among the provisions of the big Republican tax and spending law that President Trump signed a little more than a year ago are significant changes and cuts to Medicaid, which provides health care for eligible low income people, including older adults and people with disabilities. As a result of those funding reductions, states have been slashing their Medicaid budgets by making cuts to services like home health care for those with disabilities and the elderly. These services were already stretched thin, and now even more folks may struggle or be unable to access the services. For many, that will mean being forced to live at a nursing home or other institution rather than receiving care at home.

Jamie Frazier wrote about this for USA Today, and she joins me now for more. Jamie, good morning.

Jamie Frazier (4:02)

Good morning. Thanks for having me.

Kimberly Adams (4:04)

Your story focuses on one man, Nick Papadopoulos, in Georgia. Can you tell us about his story?

Jamie Frazier (4:11)

Nick was born with cerebral palsy, and for most of his life lived independently. You know, he used crutches or canes to get around. And when his mobility started to decrease, he signed up for a special Medicaid program for people with disabilities to help him get dressed in the morning or get undressed in the evening.

Then later in life, he had a medical crisis, and as a result, lost his job and his home, and then ended up in a nursing home for 10 years.

Kimberly Adams (4:47)

And you write that cases like this could become more common. Why is that?

Jamie Frazier (4:51)