PwC’s Health Research Institute published an article in early January 2025 that projects commercial healthcare spending growth will hit a 13-year high in 2025, with an 8% increase in the Group market and 7.5% in the Individual market. This is driven by inflation, the rising cost of prescription drugs and increased behavioral health utilization. Updated 2023 and 2024 trends reveal higher-than-expected costs due to increased use of GLP-1 drugs and deferred pandemic care.
While cost-saving measures like biosimilars offer some relief, they do not counter the increasing expenses. The report highlights the need for healthcare organizations to develop strategies that balance cost management with affordability. This is necessary to address the broader challenge of healthcare accessibility.
The article continues to say, “Organizations should reshape strategies; reengineer financial, workforce and business models and capitalize on each transformational opportunity — from investments in innovation and technology to deals — to overcome the inflationary chokehold and forge a path to a drastically different cost and business model.”
Healthcare inflation is driven by rising hospital service costs, which grew 6.3% year over year in Q4:23, and ongoing wage inflation. Despite improved hospital margins in 2024 compared to 2022, providers face operational challenges and higher expenses. Increased consolidation among hospitals and physicians is a key cost inflator impacting contract negotiations.
Read the full article here.
