Soaring medical and health insurance costs could be the next burdensome inflationary shoe for the US economy.
Rising health care costs will provide another stimulus for inflation-weary consumers already hit by rising food, energy and housing prices.
Health care growth could also extend beyond the current wave of inflation due to higher insurance premiums, rising drug costs and prolonged labor problems.
According to the federal National Health Expenditure Report, the United States spends $4.1 trillion annually on health care among private insurance, government-run Medicare and Medicaid, and other components of the health sector.
This far exceeds the cost of health care in other countries where universal coverage and government-run systems are more common.
According to an analysis by international consulting firm McKinsey & Company, U.S. healthcare costs are projected to rise by up to $370 billion by 2027, “due to the impact of inflation relative to pre-pandemic projections.”
A McKinsey report found that labor shortages and resulting upward pressure on wages and compensation are a major driver of rising costs.
Shortages of medical and other labor could add up to $260 billion in costs to the healthcare industry by 2027.
The McKinsey study also found that insurers are seeking premium increases of 10% on average and up to 25% in 2023.
According to the US Bureau of Labor Statistics, the latest consumer price index for September showed health insurance prices were up 28.2% from a year ago.
Healthcare costs have risen by 6.5% since September 2021.
The larger number for the former is due to annual premium increases, but healthcare-related inflation is complicated by premiums and other prices that are often set on an annual basis.
said Leslie Parker, president of HealthBenefits 411, a medical insurance and consulting company based in the Gresham, Oregon suburb of Portland. “Being tied up with contractors, there is little they can do at the cost of their services.”
This can cause price increases to lag behind other commodities such as groceries.
Parker said the current high inflation in the U.S. economy will be felt next year and in 2024.
She’s also starting to notice rising health insurance premium prices in the Pacific Northwest market.
“If you see an increase, it’s about 7 to 10 percent,” she said.
A 28.2% increase in health insurance premiums in September’s CPI showed overall inflation at 8.2%, with food items up 13%. It’s the same company as other high-inflation commodities such as butter (up 26.6%), eggs (up 30.5%), airfare (up 42.9%) and fuel oil (up 58.1%).
Hospitals, clinics, doctors, and insurance companies themselves are facing skyrocketing costs for equipment, supplies, and more.
Cynthia Cox, vice president of the Kaiser Family Foundation, pointed to price pressures related to labor and medical supplies and equipment, saying, “Healthcare prices are likely starting to rise further.
Cox said the health insurance CPI figure of 28.2% reflected historical premium volatility and the market in previous years. This is because the Annual Benefit Program is locked, and some of the effects of current inflation are not immediately reflected in insurance inflation.
“It’s definitely an eye-catching number,” Cox said of the CPI numbers.
barometer up
Employers and workers will face higher premiums during next month’s annual registration period, according to key barometers.
The Segal Health Plan Cost Trend Survey (Ask Your Insurance and Other Health Care Providers) expects health insurance costs to increase 7.4% next year.
Rising hospital and labor costs are expected to fuel health inflation next year, according to New York-based consulting firm Seagull Group.
According to Segal’s forecasts for 2023, “many health systems have had to pay contracted agents and high-billing travelers to fill vacancies due to a shortage of nurses and health care providers. , wages have risen.” “This continued wage pressure on the operating costs of hospital systems, combined with rising supply costs, will naturally lead to higher prices for services. It will take some time to fully feel the effects of these pressures.”
Segal’s research predicts that prescription drug costs will rise 9.8% next year, up from an 8.4% increase in the 2022 study. Specialty pharmaceuticals are expected to grow by 13.5% next year after he surged 13.4% this year.
The Inflation Reduction Act passed by Congress and President Joe Biden allows federal Medicare and Medicaid centers to better negotiate lower drug prices and cap annual costs and insulin prices. Continuing to face inflationary headwinds, federal efforts have not extended drug price controls to the private market.
Mercer’s National Survey of Employer-Supplied Health Plans is another key industry indicator, according to a survey of U.S. employers conducted by the Atlanta-based company. We expect health benefit costs to increase by an average of 5.6% next year.
Financial services firm AON International expects private health care costs per employee to rise from $13,020 to $13,800 in 2023, with insurance premiums rising 6.5%. That’s double what the AON study showed for 2021-2022. Hard.
help wanted
Labor shortages and resulting wage increases are putting upward pressure on wages and prices in the healthcare sector. These costs can be passed on to customers, whether employers or patients.
According to the National Association of Insurance Commissioners, the U.S. health insurance industry recently posted a large net profit of $19 billion with a 2.1% margin in 2021 and $31 billion in 2020 with a 3.8% margin. making a profit.
The healthcare sector, like other industries, faces an impactful labor shortage that has worsened since the pandemic.
According to the BLS, there were more than 10 million job openings in the US economy in August, of which more than 1.7 million were related to health and social services.
McKinsey projects that by 2025, the United States will be short of 200,000 to 450,000 nurses and 50,000 to 80,000 doctors. 20% of nurses and 10% of doctors.
According to McKinsey, this will increase “clinical labor costs” by as much as 10% over the next two years. This will lead to an increase in costs for him of $170 billion by 2027. Other hospital labor needs will grow he $90 billion by 2027.
“I think labor is a big issue,” Parker said.
But employers are rethinking how much of an increase in insurance premiums and other health care costs can be passed on to workers facing the labor shortages and high turnover rates facing much of the U.S. economy. she said there is a need.
U.S. employers have long passed on premium increases to their employees, Parker said. Now that dynamic is changing, she said.
“I think what you’re seeing now is employers struggling to do that for fear of losing their employees,” Parker said.
Cox said hospitals and clinics are facing financial difficulties due to some of the effects of the pandemic. This includes a surge in traveling nurses at risk and other high salaries as COVID strained operational bandwidth.
“Nurses could make a lot more money if they worked as traveling nurses,” Cox said.
For hospitals and other health care providers, a wave of inflation and a workforce crisis come after the unprecedented impact of the pandemic.
“Hospitals have had to contend with sudden and exponential cost increases for a variety of items over the last few years. Other supplies and equipment were in dire shortages, a huge resource associated with treating critically ill patients when hospitalizations due to COVID-19 surged. , overall economic inflation, and improved patient vision as a result of delayed treatment early in the pandemic are driving rising costs,” said Ben Taicher, spokesman for the American Hospital Association. He said: “These latest challenges mean 2022 is likely to be the most financially difficult for hospitals and healthcare systems since the start of the pandemic.”
back to clinic, hospital
The use of healthcare during and after the coronavirus pandemic has also had an ongoing impact on medical insurance premiums and other prices.
During the fear and high number of cases during the pandemic, many patients seek medical attention, treatment or other care out of fear of contracting COVID or infecting vulnerable family members or loved ones. postponed or skipped.
“Healthcare utilization has plummeted,” said Cox, adding that it has translated into economic gains for the insurance industry. “Insurers were setting premiums before the pandemic hit. During the pandemic they were very profitable. They were very profitable.”
In September 2021, CPI health insurance premiums decreased by 9.4% year-on-year. According to BLS, medical insurance prices in September 2020 increased by 14.1% compared to 2019.
Now, as healthcare utilization is rising again, so are prices, costs of care and services.
That could put further price pressure on eye and dental care, medical devices and other medical services.
The Federal Reserve Bank of Dallas expects the cost of health care services to rise next year and beyond, according to an analysis last month by economists Tyler Atkinson and Xiaoqing Zhou.
The U.S. Central Bank’s Regional Division projects that prices for healthcare services will grow from 2.1% inflation in the second quarter of 2022 to 3.9% in 2023 and 3.5% in 2024.
These numbers are part of the US Bureau of Economic Analysis’s inflation gauge, which includes more services than the CPI of interest.
Health care accounts for 18.8% of the U.S. economy, according to the KFF, and health care costs far exceed those of other countries.
The rise in healthcare is also on the radar of inflation-weary small businesses, said Anthony Smith, Oregon director of the National Federation of Independent Businesses.
The economically and financially conservative NFIB has 300,000 members nationwide.
Small businesses and their workers are at the forefront of 40-year highs due to continued challenges in inflation, economy-wide labor shortages and health insurance premiums, Smith said.
“This is a triage situation,” he said.
