Cost of healthcare expected to increase by 7% in 2024
If healthcare costs are any indication of the path inflation will take in 2024, it does not appear that consumers will receive relief any time soon, according to a new report out of PwC Health Research Institute.
The new data suggest that healthcare costs could swell by 7% in 2024 for both individual and group markets; their estimated increase is driven by multiple factors, including labor shortages, provider contract negotiations and rising drug prices. PwC’s Health Research Institute estimated the cost increase after surveying insurance actuaries that work with health plans covering over 100 million enrollees in employer-sponsored health plans and about 10 million individuals in plans on the Affordable Care Act marketplace.
The institute’s estimated 7% increase jumps from that of prior years—in 2022 medical costs were projected to rise by 5.5% and in 2023 it was estimated that they would jump by 6%. The higher estimated increase for 2024 is yet another notch in inflation’s belt, the report indicates.
“In 2022, inflation in the United States reached rates not seen since the 1980s. With rising wages and expenses compounded by clinical workforce shortages, providers across the nation are fighting against declining profit margins. In turn, health plans are pressured to raise reimbursement levels in price negotiations with providers,” the report reads.
The report cited two major inflators that will likely drive spending in 2024: inflationary impacts on health providers and the rising cost of pharmaceuticals.
Not only are healthcare providers expected to negotiate higher rate increases in 2024, but shorter gaps in between contract renewals are of interest as well. This is likely due to reimbursement cuts, staffing shortages and increased demand from patients post-COVID.
On the pharmaceutical front, plans are under pressure due to the rising median price of both new and existing drugs. Accelerated approvals of new therapies are expected to compound that effect next year, the report suggests.
Biosimilars, which the FDA considers “highly similar” with "no clinically meaningful differences” to existing FDA-approved products, have the potential to reduce the impact of the rising cost of drugs, as they cost up to 50% less than their reference product. The biosimilar market has seen significant growth in the last couple of years, but many health plans are taking a watch-and-wait approach before integrating biosimilar alternatives into their pharmacy benefits. For that reason, their impact on costs in 2024 will be limited, the report suggests.
Shifts in sites of care also could help to balance costs. Since COVID, less expensive outpatient care has been highly favored by both patients and healthcare staff. Outpatient centers were able to absorb a large amount of overflow when healthcare demands increased after the height of COVID had passed. Coupled with higher utilization of telehealth, that could help to balance the scales when plans are priced in 2024, according to the report.
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In addition to her background in journalism, Hannah also has patient-facing experience in clinical settings, having spent more than 12 years working as a registered rad tech. She began covering the medical imaging industry for Innovate Healthcare in 2021.