Healthcare costs will grow 7% in 2024, PwC finds

Dive Brief:

• 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.

Dive Insight:

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.

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