2024 Medical Cost Trends And How They Will Impact Healthcare
Rising healthcare costs are a major concern in 2024 medical cost trends. Inflation, pay increases, and other expenditures are putting a strain on the healthcare business, and clinical manpower shortages are making matters worse.
Author:Suleman ShahReviewer:Han JuJan 19, 20243K Shares158.9K Views
Rising healthcare costs are a major concern in 2024 medical cost trends. Inflation, pay increases, and other expenditures are putting a strain on the healthcare business, and clinical manpower shortages are making matters worse.
Healthcare providers are seeing their profit margins dwindle as payers negotiate prices with hospitals. Additionally, healthplans are under financial strain due to rising median costs for both new and old medications.
The greatest issues for a pressured sector are addressing affordability and disruptive prices.
If companies want to see a dramatic change in their cost, capabilities, and company footprint by 2030, they will need to rethink their strategy, reengineer their financial, workforce, and business models, and grab every transformative opportunity that comes their way, including investments in innovation and technologyas well as transactions.
2024 Marks Decade-High Surge In U.S. 2024 Medical Cost Trends
U.S. employers are anticipating a significant increase in health insurance costs, with forecasts estimating a 5.4% to 8.5% rise for 2024. Factors contributing to this increase include medical inflation, increasing demand for expensive weight-loss drugs, and the availability of high-priced gene therapies.
Over two-thirds of employers do not plan to shift the entire cost increase to their staff, highlighting the financial stress employees may face amidst economic inflation. Employers recognize the importance of health benefits in retaining a motivated workforce during challenging times.
Medical cost increases typically lag behind general inflation due to pre-established contracts between insurers and hospitals. Benefit consultants predict a portion of the cost increase in 2024 will come from weight-loss drugs, with Aon attributing a percentage point to this category alone.
The approval of gene therapies, each costing over $1 million, poses a significant financial challenge for employers. Employers are increasingly using artificial intelligenceto streamline administrative processes and considering alternative, cost-effective hospital networks for specific medical procedures.
7% Rise In Health Care Costs
Chronic health issues, catastrophic health claims, and growing prescription medication prices are projected to push up health-care expenses significantly next year. The International Foundation of Employee Benefit Plans (IFEBP) forecasts a 7% rise in health-care costs for 2024, the second year in a row.
According to a poll of 171 companies, inflation continues to have an influence on medical trends, supply and labor shortages, and the pricing of products and services.
The estimated increases for 2024 are consistent with what businesses predicted last year for 2023, but greater than what companies predicted for 2021 and 2022, when fewer workers used regular health care owing to the COVID-19 epidemic.
Employers' main causes for rising health expenditures are utilization due to chronic health issues (22%), followed closely by catastrophic claims (19%). These developments might be ascribed in part to later, more serious diagnoses as a result of many workers skipping or delaying testing during the epidemic.
The most often given explanations for the predicted increase in medical expenditures are specialty and expensive prescription medicines, cell and gene treatments (16%), and medical provider fees (14%).
While the long-term effects of missed health screenings during the pandemic may contribute to greater health-care expenditures, such screenings are expected to decline in 2024 as more workers catch up on treatment in 2023.
While some firms may pass on additional expenses to their workers, this is unlikely to be the primary tactic. Only 16% of firms intend to share expenses with workers via increased deductibles, coinsurance, copays, or premium payments.
This statistic is consistent with Mercer study from earlier this year, which revealed that 45% of companies claimed they would not pass on rising expenses to workers.
Employers informed IFEBP that the key method they will use to reduce growing health-care costs is to implement control efforts such as demanding prior permission, adopting disease management, or establishing nurse advice lines.
Work and wellness programs (13%), plan design efforts (12%), and purchasing/provider initiatives (12%), among others, are cost-cutting techniques.
Health Plan Cost Trends
The 2024 Segal Health Plan Cost Trend Survey predicts similar medical plan cost increases to current levels, suggesting a plateau. Outpatient prescription drug costs are expected to rise almost 10% annually, the highest of all health benefit cost trend estimates.
Segal surveyed managed care organizations, health insurers, PBMs, and TPAs, representing over 80% of the commercially insured and self-insured market, for 27 years.
Key health plan cost trend survey findings include a 6.8% per-person cost trend for open-access PPO/POS plans and a 14.5% specialty drug trend. Inpatient hospital, physician, and Rx trends are driven by price inflation.
Diabetes, autoimmune disease, and psoriasis have been the top three disease indications for prescription drugs in recent years, with anti-obesity and migraine drugs growing the most.
Most dental plans are projected to reach 4%, and reasonable and customary vision plans are 2.8%. Seniors with Medicare Advantage PPO plans have 4.9% medical trend projections.
New Medical Technologies And Overuse Of Care Drive Healthcare Spend
The integration of cutting-edge medical technologies is one of many factors driving the increase in healthcare spending. The burgeoning landscape, particularly in Asia Pacific, witnesses a surge in the adoption of innovative tools like artificial intelligence-driven diagnostics and groundbreaking gene therapy.
This fervent embrace of technological advancements, fueled by the region's pursuit of catching up with global counterparts, stands as a primary external force amplifying medical costs.
Furthermore, a persistent concern for insurers revolves around the unwarranted overuse of healthcare services. This predicament arises when healthcare providers, grappling with overloaded systems and time constraints, recommend an excessive array of services, thus exacerbating the per-person medical expenditure.
Notably, there's a silver lining in this scenario, with a discernible shift in insurers' perspectives. The proportion of insurers identifying overuse of care as a major cost driver witnessed a notable decline from 74% in 2022 to 59% in 2023.
This positive shift could be attributed to the post-COVID-19 landscape, where the aftermath of the pandemic-induced shutdown has led to a moderation in the surge of healthcare utilization.
The easing pressure on healthcare systems post-pandemic may contribute to a more balanced and judicious use of medical services, potentially curbing the previously escalating trend in overuse-related expenses.
Coverage Challenges In Healthcare Programs
Exclusions and disparities in healthcare programs hinder the impact of well-being and DEI initiatives. Across regions like Asia Pacific and the Middle East and Africa, certain medical insurance plans persist in excluding coverage for vital treatments, despite the recognized need for care among the insured population.
These exclusions, spanning drug and alcohol abuse treatments, HIV/AIDS medications, fertility treatments, and gender-affirming care, can significantly impact employee well-being and impede diversity, equity, and inclusion (DEI) efforts.
While insurers express a growing interest in fostering inclusivity, legal and sociocultural considerations in some countries pose challenges to expanding eligibility in these programs.
In contrast, public healthcare systems in other regions embed inclusion and widespread program eligibility, but quality and access issues persist, leaving coverage gaps that private insurers have yet to address.
Increasing Cost Of Pharmaceuticals
Inflationary pressures on plans are coming from the growing median pricing of both new and old medications. There will likely be no letup in pharmacy trends in 2024, thanks to expedited approvals of novel cell and gene treatments.From 2023–24, pharmaceutical price increases are projected to have an inflationary effect of single digits or double digits.
The new pharmaceutical pipeline is expected to have a greater impact on medical cost trends, according to payers. To ensure they don't underestimate the total cost trend in 2024 and beyond, plans have started to include double-digit pharmaceutical trends into their cost projection predictions.
As people look for alternatives to conventional medication, the rising number of gene therapies with regulatory approvals is likely to send prices soaring. In 2024, plans will have to deal with a new problem: doctors may now prescribe certain diabetic medications for weight reduction.
Regulatory developments, such the Inflation Reduction Act (IRA) and the elimination of the ceiling on Medicaid rebates based on average manufacturer price (AMP) in 2024, provide challenges for pharmaceutical producers about pricing and Gross-to-Net implications.
Several important factors, such as the possibility of new laws at the federal and state levels, the rise of PBM/payer usage management and competitive requests for proposals, the dynamics of patient aid and copayment programs, and others, are keeping the pressure on.
Finding the right balance between investing in research and development and innovation and making sure patients can get their treatments will be a constant issue for manufacturers.
Biosimilars Coming To Market
Biosimilars, which are more than 50% less expensive, may be able to control rising medicine prices. Nine adalimumab biosimilars have FDA approval, with most scheduled to debut within a year.
Health plans are collaborating with pharmacy benefit managers to determine which biosimilars are most cost-effective and may use prior authorization or other cost-sharing design tools. Consider the effect on member experience and possible use as pricey pharmaceuticals become more affordable.
Lantus biosimilars last year and Humira® this year were the first and biggest biosimilar market penetration testing in pharmacy benefits. Biosimilars may replace or exclude innovators on the formulary, and manufacturers have created high and low wholesale acquisition cost versions to cater to various market niches.
Payers and pharmacy benefit managers are using biosimilars to cut medicine prices and sometimes the class/therapeutic area. As many businesses remain dedicated to near and long-term growth, the industry will watch potential regulatory/legislative measures that affect the biosimilar market.
Shift In Sites Of Care
The epidemic quickly moved treatment from pricey inpatient hospitals to cheaper outpatient or emergency departments. A two-pronged benefit helped health plans and payviders control costs by reducing hospital use and shifting to outpatient settings. Future care venues and virtual delivery are likely to cut total care costs, helping plans counter trend inflators.
As demand for home-based and virtual care rises, the healthcare system enters a new phase. Plans are pricing 2023 and beyond plans to account for growing use of cheaper care venues and virtual care, offsetting trend inflators.COVID-19 has led to reduced hospital use, lowering costs and moving treatment to outpatient settings in the last two years.
There is indication that trend will deflate until inpatient and surgical use returns to pre-pandemic levels, if at all.Providers play a crucial role. They may help plans create ownership structures that share financial advantages and encourage doctors to switch to outpatient treatment.
This may relieve inpatient capacity, which has recovered the slowest nationwide due to a shortage of competent clinical workers. Please note that not all care can be moved to ambulatory settings. Frail or complexly comorbid patients may not benefit from this therapy.
Use cases and when patients may safely move to cheaper settings should be defined. Employers may promote telemedicineuse via plan design adjustments and new third-party providers.
The growing number of virtual behavioral health appointments allows for more flexibility in treating mental healthissues. Future virtual primary care appointments are projected to rise.
FAQs - 2024 Medical Cost Trends
What Are The Anticipated Factors Influencing Medical Cost Trends In 2024?
The 2024 medical cost trends are expected to be influenced by various factors, including advancements in medical technologies, changes in healthcare policies, and shifts in patient behaviors.
How Might The COVID-19 Pandemic Impact Medical Cost Trends In 2024?
The lingering effects of the COVID-19 pandemic could have a significant impact on medical cost trends in 2024, affecting areas such as telehealth adoption, mental health services, and vaccine-related expenses.
Are There Specific Regions Or Countries Experiencing Unique Medical Cost Trends In 2024?
Distinct regional variations in healthcare infrastructure, insurance practices, and government policies may contribute to unique medical cost trends in different parts of the world in 2024.
What Role Do Advancements In Medical Technologies Play In Shaping Medical Cost Trends For 2024?
The continued development and integration of advanced medical technologies, such as AI-driven diagnostics and gene therapies, are likely to be key contributors to the medical cost trends observed in 2024.
How Are Insurance Providers Adapting To The Evolving Landscape Of Medical Cost Trends In 2024?
Insurance providers are adapting to the changing landscape of medical cost trends in 2024 by reassessing coverage policies, exploring innovative healthcare delivery models, and addressing challenges related to exclusions and program eligibility.
Final Thoughts
Keeping up with the trend from year to year is a primary goal for many health plans' ongoing investments in cost measures.For instance, from 11% in 2012 to 60% in 2020, value-based care participation—which improves payer-provider incentive alignment—rose sharply.
Predicted to have a deflating effect on medical cost trends is the expansion and acquisition of national health plans, which have a track record of superior medical cost management.
The results of these efforts are now included in the year-over-year baseline for plans that are experienced in controlling total cost of care, rather than being used as a deflator.
Jump to
2024 Marks Decade-High Surge In U.S. 2024 Medical Cost Trends
7% Rise In Health Care Costs
Health Plan Cost Trends
New Medical Technologies And Overuse Of Care Drive Healthcare Spend
Coverage Challenges In Healthcare Programs
Increasing Cost Of Pharmaceuticals
Biosimilars Coming To Market
Shift In Sites Of Care
FAQs - 2024 Medical Cost Trends
Final Thoughts
Suleman Shah
Author
Suleman Shah is a researcher and freelance writer. As a researcher, he has worked with MNS University of Agriculture, Multan (Pakistan) and Texas A & M University (USA). He regularly writes science articles and blogs for science news website immersse.com and open access publishers OA Publishing London and Scientific Times. He loves to keep himself updated on scientific developments and convert these developments into everyday language to update the readers about the developments in the scientific era. His primary research focus is Plant sciences, and he contributed to this field by publishing his research in scientific journals and presenting his work at many Conferences.
Shah graduated from the University of Agriculture Faisalabad (Pakistan) and started his professional carrier with Jaffer Agro Services and later with the Agriculture Department of the Government of Pakistan. His research interest compelled and attracted him to proceed with his carrier in Plant sciences research. So, he started his Ph.D. in Soil Science at MNS University of Agriculture Multan (Pakistan). Later, he started working as a visiting scholar with Texas A&M University (USA).
Shah’s experience with big Open Excess publishers like Springers, Frontiers, MDPI, etc., testified to his belief in Open Access as a barrier-removing mechanism between researchers and the readers of their research. Shah believes that Open Access is revolutionizing the publication process and benefitting research in all fields.
Han Ju
Reviewer
Hello! I'm Han Ju, the heart behind World Wide Journals. My life is a unique tapestry woven from the threads of news, spirituality, and science, enriched by melodies from my guitar. Raised amidst tales of the ancient and the arcane, I developed a keen eye for the stories that truly matter. Through my work, I seek to bridge the seen with the unseen, marrying the rigor of science with the depth of spirituality.
Each article at World Wide Journals is a piece of this ongoing quest, blending analysis with personal reflection. Whether exploring quantum frontiers or strumming chords under the stars, my aim is to inspire and provoke thought, inviting you into a world where every discovery is a note in the grand symphony of existence.
Welcome aboard this journey of insight and exploration, where curiosity leads and music guides.
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