Since the start of the Covid-19 pandemic in 2020, health care costs have increased dramatically, and for 2022, it looks as though this trend will continue. PricewaterhouseCoopers (PwC) projects a 6.5% increase in health care costs for 2022.[1] While this is not as high as last year, it is still the second-highest increase since 2015.

Source: PwC Health Research Institute medical cost trends, 2007-2022. The 7% medical cost trend for 2021 was revised from a range o­f scenarios, from 4% to 10%, originally projected in PwC Health Research Institute’s Medical Cost Trend: Behind the Numbers 2021 published in June 2020.

PwC’s projection is of medical trend, which is defined as an annual forecast of health care inflation, based on known variables. It can also be defined as the projected percentage increase in the cost to treat patients from one year to the next, assuming benefits remain the same.[2]

Factors Affecting 2022 Medical Trend

The forces affecting medical trend can be characterized as either inflators or deflators. Inflators are those trends that are expected to drive up medical costs, and deflators will lower them.[3]
Here are the main factors at work:

Inflators

1. Pent-up demand for deferred care: During the pandemic, consumers delayed preventative care, screenings, and lab tests, as well as care for chronic illnesses. The demand for this delayed care grew substantially in 2021 and is expected to follow suit in 2022.[4]
   
2. Investment for infrastructure by health care providers: Hospitals, clinics and even physicians are making investments in preparedness and virtual care. To expand, hospitals are investing in:
   – Their supply chains to avoid running out of critical equipment during the next emergency
   – Predictive modeling so they can better forecast and plan
   – Patients’ digital experience with mobile apps, portals, and other communication tools
   
3. Increased use of mental health services: The importance of behavioral health care came to light in 2020, as more people struggled with anxiety, depression, and substance use. As the Covid-19 pandemic hit the world, it disrupted or halted mental health services in 93% of countries worldwide, including the United States.[5] This trend caused demand for mental health services to increase and is expected to continue for the foreseeable future.
   
4. Specialty drugs are becoming a greater portion of total Rx spending: A record number of specialty drugs are expected to receive FDA approval in 2022, some with price tags of $1 million or more. Specialty drugs are high-cost prescriptions used to treat complex or chronic conditions. They often require special handling and are given to patients through injection or IV. Less than 2% of Americans use specialty prescriptions, but they account for more than half (51%) of total drug spend.[6]

Deflators

1. Consumerism: During the pandemic, many consumers started to embrace care outside of the doctor’s office and shopped around for lower-cost, more convenient alternatives. Usage of emergency rooms decreased and was replaced by telemedicine and urgent care clinics.[7]
   
2. Increase in remote work for employees and decrease in real estate spend: The pandemic forced a major shift in many industries toward remote work. This shift also occurred in health care, as much patient care pivoted to telemedicine and virtual visits. As a result, health systems expect to lower their real estate spending by increasing remote work capabilities for business functions that do not involve direct patient care.[8]

Berkley Accident and Health Can Help

Watch our latest video: Stop Loss Market Update: 2020 Medical Trend

Berkley Accident and Health is committed to helping employers improve their health risk management with cutting edge cost-containment services and solutions. Through our Berkley Edge program, we can help mitigate excessive claim charges before they hit your bottom line. Contact your Berkley Accident and Health representative to learn more.

This is not a legal opinion. Always seek your own counsel before making changes to your benefit plan.

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[1] PwC: Health costs to likely go up 6.5% in 2022 as systems invest in supply chain, digital health, https://www.fiercehealthcare.com/payer/pwc-health-costs-to-likely-go-up-6-5-2022-as-systems-invest-supply-chain-digital-health

[2] Medical cost trend: Behind the numbers 2022, https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html

[3] Medical cost trend: Behind the numbers 2022, https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html

[4] PwC: Health costs to likely go up 6.5% in 2022 as systems invest in supply chain, digital health, https://www.fiercehealthcare.com/payer/pwc-health-costs-to-likely-go-up-6-5-2022-as-systems-invest-supply-chain-digital-health

[5] COVID-19 disrupting mental health services in most countries, WHO survey, https://www.who.int/news/item/05-10-2020-covid-19-disrupting-mental-health-services-in-most-countries-who-survey

[6] Advanced Medical Strategies (AMS) – 2020 Specialty Drug Trends Report

[7] Medical cost trend: Behind the numbers 2022, https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html

[8] Medical cost trend: Behind the numbers 2022, https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html