By OPEN MINDS Circle
U.S. health care costs are projected to increase 7% in 2024 for the individual and group market, continuing a growth trend for the third year. In 2022, costs increased by 5.5%, and for 2023 are projected to increase by 6.0%
The projected 2024 cost growth has three key factors, according to interviews with health plan actuaries:
- Inflationary unit costs due to contracted health care professionals and organizations. Hospitals and physicians are expected to seek higher reimbursement rates in contract negotiations. Workforce shortages and physician group consolidation are anticipated to amplify this trend.
- Pharmacy cost increases, driven by specialty drugs, such as new medications to treat diabetes or obesity. The median price of new drugs is rising, and prices for existing drugs are also rising.
- Ongoing increases in the national inflation rate are expected to affect costs.
The cost growth increases are anticipated to be mitigated by greater availability of generic biosimilar treatments. Plans have also noted that inpatient utilization has decreased and outpatient care has increased, which can help contain costs.
The health plan cost growth estimates may be subject to the following additional factors that were not included when developing the estimates:
- Total cost of care management: Many health plans are investing in initiatives such as value-based care. National health plans generally demonstrated better cost management and subsequently achieved lower cost trends. As the national plans continue to expand market share, they will have a deflationary effect overall on medical cost trends.
- The net effect of COVID-19-related policy changes at the state and federal level is likely to be neutral because the policies related to need for vaccines, testing, and treatment vary. Health plans did not report a causal relationship between pent-up demand for care during the pandemic and utilization of care.
- Health equity efforts and related efforts to improve long-term population health have not been factored into health plan cost of care models, although health plans are working on implementing federal guidance on health equity.
- Behavioral health utilization growth was not accounted for in health plan pricing and forecasting. Behavioral health costs remain relatively lower than other medical costs.
- Federal price transparency rules are expected to have a neutral effect on the 2024 trend. However, over the longer term when more years of data are available, health plans could experience both upward and downward pressures.
- Medicaid redeterminations after the COVID-19 public health emergency ended in April 2023 are anticipated to affect the individual market, but not the group market. The magnitude depends on the number of former Medicaid beneficiaries who are disenrolled and then eventually purchase individual plans. The risk profile of this population is unknown.
These findings were presented in “Medical Cost Trend: Behind The Numbers 2024” by PwC. PwC’s Health Research Institute (HRI) surveyed and spoke with actuaries employed by US health plans covering 100 million employer-sponsored large and small group members and 10 million Affordable Care Act (ACA) marketplace members. The goal was to determine major medical cost inflators and deflators cited by health plans.
For more information, contact: Megan DiSciullo, US & Mexico Communications Leader, PricewaterhouseCoopers LLP, One North Wacker Drive, Chicago, Illinois 60606; 609-903-4394; Email: megan.disciullo@pwc.com; Website: https://www.pwc.com/