Yahoo Finance PwC report: Medical costs to increase by a whopping 7% in 2024
The cost to treat patients will rise an estimated 7% in 2024, which is bad news for insurance premiums in the next year, according to a new report from PwC.
The big increase comes on top of more than 6% growth this year, compared to 2022, and 5.5% growth in 2022.
Key drivers of the cost growth: the hot weight loss drug space and new gene therapies — the latter of which can cost millions of dollars — as well as increased consolidation in the hospital and care facility space.
The weight loss drugs are especially hitting employers' pocketbooks, and insurers are balking at coverage for use as an obesity treatment, though they continue to cover Type 2 diabetes patients.
For example, weight loss company Found's CEO Sarah Simmer told Yahoo Finance recently that employers have seen Novo Nordisk's (NVO) Ozempic jump to the No. 1 cost in drugs they are paying for, with one employer confiding that Ozempic prescriptions are up 400% year over year.
But that's just one pressure point. Like other industries, the inflationary environment and worker shortages are also pressuring the industry, causing increased costs to be felt through all parts of the broader health system.
"All health plans ranked inflationary impacts on health providers among the top three inflators for 2024. In a persisting high inflationary environment, hospitals and providers will often be pushed to seek significant rate increases from payers," the PwC report authors said.
That, in turn, could affect what insurers charge for premiums, according to Kaiser Family Foundation's Larry Levitt.
"There are cost pressures bubbling up throughout the health care system, and those higher costs will translate directly to higher premiums for employers and individuals," said Levitt, executive vice president of health policy.
But, he added, "While employers have historically tried to shift premium increases onto workers, that may be difficult in the current labor market with unemployment so low."
And while the impact of inflation might be receding in other industries, it could only just be starting in healthcare.
In addition, the drop in Medicaid enrollees as a result of the end of the pandemic, and funding from the government, could increase the number of Affordable Care Act marketplace plan enrollees. While those individuals could be eligible for subsidies, the cost of utilizing the health plans will again add to the costs for insurers.
But it's not all bad news.
There are some small moves helping to neutralize the cost burden, according to the report.
That includes more biosimilars on the market, which means cheaper options are available for patients and insurers, as well as more healthcare providers participating in relationships with insurers to receive bundled payments rather than individual fees for each service provided within a visit (known as value-based care). All of this helps to incrementally decrease the cost burden.
In addition, thanks to the pandemic, the use of costly care sites like hospitals has decreased.
"With the increased demand for home-based services and virtual care, the healthcare delivery system has reached a new phase. Plans are factoring in higher utilization of less expensive care settings and virtual care when pricing their 2023 plans and beyond, helping plans offset the trend inflators," the authors wrote.
All told, if inflation and worker shortages persist, it could result in continued pressure on a struggling industry that is slow to adopt innovative changes.
"Organizations need to reshape strategies, reengineer financial, workforce and business models and seize every transformational opportunity — from investments in innovation and technology to deals — to clear the path for a drastically different cost, capabilities and business footprint by 2030," the report said.
Follow Anjalee on Twitter @AnjKhem
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