The previous year saw a record high in the expense of healthcare delivered worldwide, as the medical trend rate first entered the double digits. Patient care is becoming more and more expensive. High rates of inflation, growing salaries, and other expenses are putting strain on the healthcare sector, which is further exacerbated by a scarcity of clinical workers.
Health payers are negotiating hospital pricing while provider profit margins are still declining. Along with rising median costs for both new and old pharmaceuticals, health plans are also feeling the strain. In this article, we will discuss the 2024 medical cost trends.
Medical Costs Are Expected To Rise Over The Longer Term
Insurance companies anticipate that expenses will start to rise again in the long run, even if the global medical trend is predicted to slow down in 2024. For the next three years, more than half of insurers (58%) predict a higher or noticeably higher medical trend.
Over half of insurers in Europe (57%) and Asia Pacific (59%), as well as eighty-four percent of insurers in the Middle East and Africa, anticipate higher or significantly higher healthcare cost increases during this period; in the Americas, less than half of insurers (45%) predict this level of cost increase.
Over the next three years, 58% of insurers predict a higher or noticeably higher medical trend.
Telehealth Offerings Continue To Be A Priority For Insurers
Telehealth services were introduced by 40% of insurance companies worldwide the previous year, making it one of the most popular coverage modifications that insurers are making to their medical portfolios.
By enabling quick and easy access to a variety of medical services, such as general care and specialty care, prescription medications, mental and behavioral health programs, and care navigation help for acute diseases, telehealth has completely changed and enhanced the way that healthcare is delivered.
Furthermore, insurers understand that telemedicine offers chances to control healthcare expenses better. Particularly in the field of mental health, telehealth and virtual treatment assist lessen the need for expensive ER visits and provide affordable access to experts.
The Increasing Cost Of Pharmaceuticals
Regulations like the Inflation Reduction Act (IRA) and the elimination of the Medicaid rebate ceiling based on average manufacturer price (AMP) in 2024 will have an influence on pricing and Gross-to-Net for pharmaceutical producers.
Potential legislation from the federal and state governments, more excellent payer usage management, PBM, competitive RFPs, patient copay and assistance program dynamics, and other significant factors are all exerting pressure.
Manufacturers will always need help in striking an equilibrium between continuing to spend on R&D and innovation and ensuring that patients have appropriate access to their medications.
Biosimilars Coming To Market
Plans should collaborate closely with pharmacy benefit managers to determine whether a biosimilar is the most economical; in some cases, sticking with the current biologics may be more economical due to competition-driven higher rebates.
Plans may look at different usage management strategies and cost-sharing designs, such as prior authorization, to encourage members to choose more economical solutions. Biosimilar market maturity within the pharmacy benefits area is only starting, even though biosimilars have expanded and carved out a niche on the medical benefit side, notably inside physician-administered medications for cancer.
With rising testing during the previous year, the introduction of Humira® this year and Lantus biosimilars last year offered the first and most significant assessments of biosimilar penetration on the pharmacy benefit.
Medicaid Redetermination
The Families First Coronavirus Response Act, approved by Congress in 2020, forbids state Medicaid agencies from denying enrollment to anybody unless they make a particular request to do so.
Health plans and pay providers generally agree that the Individual market will probably be the main area affected by Medicaid redetermination. In general, the majority of plans had a negligible or neutral influence on the trajectory of medical costs in 2024.
Why Are Healthcare Costs Rising?
There is no denying that the healthcare system in the United States is the priceiest in the world. By 2030, national health spending is expected to exceed $6.8 trillion, according to CMS projections.
Aging Population
One of the most prominent adult groups in America, the Baby Boomers, is getting close to retirement. As a result, the population over 65 is expanding at a never-before-seen pace. The U.S. Census Bureau projects that by 2030, 21% of the population will be 65 years of age or older. By 2060, older Americans will account for about 25% of the total population.
Two significant factors that are predicted to contribute to increased healthcare expenses are the expansion in Medicare membership and the prevalence of complicated, chronic illnesses.
In addition to Medicare's increase, the senior population is more likely to have chronic diseases. According to the National Council on Aging, 77% of older persons have two or more chronic diseases, and 80% of older Americans have one chronic ailment.
Chronic Disease Prevalence
According to the Centers for Disease Control and Prevention (CDC), six out of ten persons in the US suffer from a chronic illness. Heart disease, stroke, cancer, diabetes, chronic kidney disease, and chronic obstructive pulmonary disease (COPD) are among the most prevalent chronic illnesses in the United States.
Long-term medical care is often necessary for chronic illnesses. Specific ailments may also make it difficult to do everyday tasks, which may call for the usage of home health care or other forms of assistance. The difficulties of managing a chronic disease may also cause anxiety, sadness, and other mental health issues in some individuals.
Patients with chronic illnesses run the danger of developing potentially fatal consequences when they put off receiving treatment. Long-lasting adverse effects are more likely to occur in those who seek treatment promptly. The long-term treatment of such adverse effects will probably drive up consumer and public health spending.
Workforce Shortages Lead To Higher Reimbursement Rates
The general trend in healthcare expenditure is driven by provider bargaining choices, which are heavily influenced by overall inflation and labor shortages. The coronavirus epidemic reduced employment in the medical field. Hospitals raised pay and spent more on hiring temporary workers to cover staffing shortages.
Employment in healthcare was predicted to rise. PwC estimated that total healthcare employment would have increased consistently, with ambulatory personnel exhibiting the most significant growth, using data from the Bureau of Labor Statistics Employment Cost Index.
New Medical Technologies And Overuse Of Care Drive Healthcare Spend
The adoption of new medical technology, such as gene therapy and diagnostic tools driven by artificial intelligence, continues to be the critical external driver driving up medical expenditures.
This is especially true in the Asia Pacific, where there has been a tremendous advancement in medical technology in an attempt to catch up with other areas.
In addition, because doctors' recommendations for too many treatments are the primary cause of rising medical expenses per capita, insurers remain worried about the misuse of care. This often happens when clinicians are overworked and need more time to interact with patients.
Higher Out-Of-Pocket Costs
Increased insurance costs are only one aspect of the situation. More money is being paid out of pocket by Americans than ever before. The cost of healthcare has increased significantly as a result of the switch to high-deductible health plans (HDHPs), which demand out-of-pocket expenses of up to $14,000 per family.
The greater deductible is lessened in HDHPs thanks to employer payments. The research foundthat whereas preferred provider organization (PPO) members paid up to 27% of their premium, HDHP participants only paid 20% of their total.
FAQs About The 2024 Medical Cost Trends
Why Are Medical Costs Expected To Rise In 2024?
Various factors contribute, including inflation, workforce shortages, and the prevalence of chronic diseases.
How Are Insurers Adapting To Rising Costs?
Insurers prioritize telehealth services and negotiate with healthcare providers to control expenses.
What Role Do Biosimilars Play In Medical Cost Trends?
Plans collaborate with pharmacy benefit managers to assess the cost-effectiveness of biosimilars, impacting overall pharmaceutical spending.
Final Thoughts
According to the 2024 medical cost trends, it's getting more expensive to treat people. High inflation, rising pay, and other costs are putting pressure on the healthcare business. More professional workers are needed to make things even better.
Health insurers are discussing prices with hospitals, but providers' profit margins are still shrinking. Higher median prices for new drugs and rising prices on old drugs are also making health plans' budgets tighter.
Every year, Americans spend a lot of money on health care, and the costs keep going up. This rise is partly because of national programs like Medicare, Medicaid, and the Affordable Care Act, which gave more Americans access to free or low-cost health care.