Weekly Business Insights 11/06/2024

Medical cost trend: Behind the numbers 2025

Commercial health care spending growth is estimated to grow to its highest level in 13 years, according to PwC’s newest research into annual medical cost trend. PwC’s Health Research Institute (HRI) is projecting an 8% year-on-year medical cost trend in 2025 for the Group market and 7.5% for the Individual market. This near-record trend is driven by inflationary pressure, prescription drug spending and behavioral health utilization.

HRI is also restating the 2023 and 2024 medical cost trends as higher than previously reported based on the input of health plans we surveyed and their trend experience. This unfavourable trend reflects higher than expected utilization of glucagon-like peptide-1 (GLP-1) drugs as well as higher acuity (higher levels of care) inpatient and outpatient utilization. Inpatient and outpatient utilization were driven by demand from care deferred since the pandemic, which was met by newly created capacity as sites of care shifted to outpatient, professional and ambulatory care settings.

PwC is projecting an 8% year-on-year medical cost trend in 2025 for the Group market and 7.5% for the Individual market, driven by inflationary pressure, prescription drug spending and behavioural health utilization.

Medical cost trend: Behind the numbers: PwC

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5 healthcare trends we’re following in 2025

Insights from our research and discussions with industry experts reveal the technologies, challenges, and healthcare trends that will influence the industry in 2025.There are 5 key trends:

1.       AI will continue to be a transformative force

2.      Lifesciences companies will step into D2C space

3.      Mental health ventures into urgent care space

4.      Non-Opioid therapies to reshape pain management

5.      Medical cost will raise to its highest peak in 13 years

The projected rise in medical cost growth, set to reach its highest level in 13 years, serves as an urgent call for healthcare organizations to rethink their cost management strategies. Inflationary pressures, particularly the rising costs for supplies and labour, alongside prescription drug spending and increasing use of behavioural health services, are significant contributors.

2025 Healthcare Trends Overview | Future of Healthcare (definitivehc.com)

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Consumers and convergence could disrupt the status quo

As convenient, affordable, and consumer-focused products and services become more prevalent, incumbent life sciences and health care organizations could lose margin if they are unable to meet consumers where they are. In 2025, incumbent organizations are likely to pay much closer attention to evolving consumer preferences and expectations. This could help drive convergence among life sciences and health care organizations as innovative companies try to fill gaps in care. According to results of our 2025 Life Sciences and Health Care Outlook surveys, more than half (54%) of executives agree that it is important to engage in strategic cross-industry collaborations and convergence across different sectors and industries.

The life sciences and health care sector has long been focused on improving health outcomes, experience and reducing costs in the system and for consumers. Although there has been progress, the data suggests there is more work to do.

To get there, health care organizations should also look for opportunities to keep up with changing consumer preferences and needs by helping to ensure that care is convenient and affordable for everyone. In the year ahead, a growing number of consumers is likely to expect more from the industry, which could push some organizations to think outside the box. Some of the most innovative consumer-focused solutions could come out of collaborations or through relationships with organizations that operate outside of life sciences and health care. Industry leaders will need to be bold, exercise leadership, and grow an operation that can meet the moment of the consumer.

2025 Outlook for US Life Sciences and Health Care | Deloitte US