Inflation (finally) hits health

While health care prices have so far been largely unaffected by record US inflation, prices will likely rise faster in the future, driving insurance premiums higher and more expensive services for consumers and employers in 2023.

Health care costs are rising, but still below inflation

Since 2000, health care costs, including medical services, insurance, drugs and medical equipment, have generally increased faster than other costs in the overall economy. Over the past two decades, health care costs have increased by 110.3%, while the prices of all consumer goods and services have increased by 71%.

However, the usual trend has reversed this year, with health care costs rising at a rate below headline inflation. According to an analysis of Bureau of Labor Statistics given by the Kaiser Family Foundationhealth care costs rose 4.8% in July compared to the same period last year, while overall prices rose 8.5%.

Overall, the consumer price index showed that health care costs rose in several different areas, including:

  • Nursing homes and day services for adults (4.5%)
  • Inpatient hospital services (3.9%)
  • Outpatient hospital services (3.5%)
  • Prescription drugs (2.8%)
  • Physician Services (0.8%)

Additionally, the producer price index showed year-over-year health service costs rose 4.1% for private insurers and 3.4% for Medicaid in July, while costs fell 0.6% for Medicare. In general, costs for private insurers are higher and increase faster than those paid by public insurers.

Generally, health care costs see a relatively stable increase of 1% to 5% in costs every year, but high rates of inflation can cause medical care prices to rise, especially insurance premiums. higher in the future. According to a survey of approximately 2,500 eHealth Medicare beneficiaries, 95% said they were worried about the impact of inflation on health care costs, and nearly 50% said their Health care costs had already risen due to inflation.

Employer health care costs will rise to nearly $14,000 in 2023

According to a new analysis from a financial services company aonhealth care costs for employers are also expected to rise in 2023.

Using data from nearly 700 U.S. employers representing approximately 5.6 million employees, Aon determined that employer health care costs are expected to rise from $13,020 per employee to more than $13,800 per employee in 2023. This 6.5% cost increase is more than double the increase they experienced from 2021 to 2022.

Aon also noted that new technologies, the severity of catastrophic claims, blockbuster drugs and a growing share of specialty drugs are likely to impact healthcare costs in the future.

Aon’s analysis found that employers’ costs for health plans rose 3.7% in 2022, while employee premiums on their paychecks rose a more modest 0.6%. Typically, employees subsidize 81% of the cost of health plans for their employees.

“In what remains a tight labor market, employers are absorbing most of the health care cost increases,” Debbie Ashford, chief health solutions actuary for North America at Aon, said in a statement. . “Employers have a higher budget due to uncertainty and the anticipation that inflationary pressures will increase the cost of health care services.”

To reduce high healthcare costs, Aon recommends that employers identify and anticipate when the costs associated with chronic and complex solutions may arise in order to find solutions in advance. According to Ashford, 1% of a plan’s members can account for 40% of its expenses in any given year.

“The effect of chronic disease has far-reaching implications beyond what we see with healthcare costs, on other areas of business, such as absence and productivity, disability and workers’ compensation,” said Farheen Dam, Aon North America Healthcare Solutions Leader. . “By focusing on chronic disease, we not only improve the health and happiness of employees, but we help improve the way they live and work.” (Lagasse, Health financing, 08/26; Wager et al., Peterson-KFF Health System Tracker, 8/24; Asser, Health Leaders, 08/26; Aon press release, 8/18)

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