Healthcare costs to jump 7% in 2024: PwC

Healthcare costs will increase by a projected 7 percent in 2024 as the healthcare industry continues to face high inflation, rising wages and other costs, which are compounded by workforce shortages, according to a report from the PwC Health Research Institute.

The report estimates the projected increase in per capita costs of medical services and prescription medications that affect payers' group and individual plans. Health insurers use the projection to calculate health plan premiums for the coming year. 

For example, a 5 percent trend means that a plan that costs $10,000 per member in 2023 would cost $10,500 in 2024. The medical cost trend, or growth rate, is primarily influenced by changes in the price of medical products and services and prescription medications, known as unit cost inflation, and changes in the number or intensity of services used or changes in per capita utilization.

Six takeaways:

1. The 7 percent spike is higher than the projected medical cost trend in 2022 (5.5 percent) and 2023 (6 percent).

2. Key drivers of the cost growth include new gene therapies — which can cost millions of dollars — and the weight loss drug space as well as increased consolidation among hospitals and other healthcare facilities

3. Hospitals and physicians are expected to seek higher rate increases in contract negotiations. Workforce shortages and physician consolidation can further amplify the inflationary effects on providers, with burnout and rising patient demand expected to keep the pressure on clinical workforces across the U.S.

4. Payers are negotiating pricing with hospitals while provider profit margins continue to erode, , according to the report. Health plans are also feeling the squeeze of higher median prices for new drugs as well as increasing prices on existing drugs.

5. Some positive changes in the pharmaceutical market and care setting — including biosimilars coming to market and care shifting to outpatient settings — are expected to help counteract inflationary pressure, but their effect will be overshadowed by the inflators, according PwC. 

6. Many health plans continue to invest in total cost of care management initiatives, such as value-based care, that helped maintain year-over-year trend, according to the report. National health plans generally demonstrated better cost management and subsequently achieved lower cost trends. As these national plans grow, they are projected to have a deflator effect overall on medical cost trends.

Click here to read the report. 

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