- Healthcare costs are expected to rise 7% next year as inflation drives providers to seek rate increases from insurers and pharmaceutical costs rise, according to PwC’s annual report.
- The consultancy, which surveyed actuaries at insurers that offer group and individual plans, said the increase outstrips its predictions for 2022 and 2023, which were 5.5% and 6% respectively.
- Some trends are pushing costs down, like the availability of more biosimilar drugs and a shift toward cheaper outpatient care. A number of other factors are expected to be cost neutral but key to watch, including health plans’ investment in value-based care, COVID-19 impacts, behavioral healthcare utilization, health equity initiatives, price transparency rules and Medicaid redeterminations, PwC said.
Though inflation pressured the U.S. economy in 2022, its impact wasn’t felt as significantly in healthcare, an industry where many prices are locked in existing annual or multi-year provider contracts.
But providers continue to face workforce shortages and high labor costs, pushing them to seek higher reimbursement from payers to address financial shortfalls, PwC said.
Even if employment in the healthcare sector stabilizes next year, health plans are still expected to feel the blow as demand for care increases utilization. Both UnitedHealth and Humana recently flagged higher outpatient utilization than expected after patients delayed nonessential care during the pandemic.
High-cost drugs are also predicted to push increased healthcare costs next year, compounded by shortages and supply chain disruptions. The report pointed to new cell and gene therapies — many of which have been approved by the Food and Drug Administration in the past few years — and the rise of pricey GLP-1 agonist drugs for diabetes and obesity that have seen skyrocketing demand.
“New drugs typically exist in the market for 15 years on average without competition from generic drugs, along with general increases in drug prices over time,” the report’s authors wrote. “Multiple insurers report that the trend used for pricing 2023 plans was lower than actual experience, driven by higher-than-expected pharmacy trends for both brand and specialty drugs.”
But biosimilars — biologic medicine that’s very close to a previously FDA-approved product — could buck that trend. The report noted the lower costs for biosimilar products would have a modest impact in 2024, but most health plans surveyed had hopes of increased savings in the future.
Care provision shifting to cheaper outpatient sites, a trend accelerated by the pandemic, could also deflate costs, the consultancy found.
“With the increased demand for outpatient surgeries, home-based services and virtual care, the healthcare delivery system has reached a new phase,” PwC said. “Plans are factoring in higher utilization of less expensive in-person settings and virtual care going forward when pricing their 2023 plans and beyond.”