Over the past few decades, the healthcare industry has made significant progress in treatment modalities, advanced diagnostics, and in improving overall patient well being. However, healthcare and modern day care delivery costs have increased tremendously over the last 20 years, often prohibitively so for millions of people globally.
There are many reasons for these costs. For one, healthcare requires a highly trained labor force, entailing skilled physicians, nurses, and allied health professionals that often go through years, if not decades, of training. Pharmaceutical prices and the costs for research and development have sky-rocketed, as new drugs and medications are constantly being developed to make treatment more efficient and increase patient quality of life.
This phenomenon parallels the fact that there is a quickly aging population that will require more resources and care in the coming years. This is particularly true in the United States, where the “baby boomer” generation is now close to retirement age and will have acute healthcare needs in the coming years. An article published late last year by Blue Cross Blue Shield of California explains: “The average [healthcare] spending growth from 2018 to 2027 is expected to see an annual proliferation of 5.5% – an increase from 2018’s 4.4%; The prices of healthcare goods and services are anticipated to rise by an average of 2.5% annually from 2018 to 2027, contributing to nearly 50% of the estimated growth in personal healthcare spending. For comparison, during the period of 2014-2017, there was an increase of 1.1%. Medicare spending growth is expected to increase by an average rate of 7.4% each year from 2018 to 2027. In comparison, Medicaid has a 5.5% average annual growth and private health insurance a 4.8% average annual growth for the same years.”
On a congruent note, last week, two of the largest healthcare insurance companies, UnitedHealthcare and Humana, signaled concerns that they expect a significant rise in medical costs as more people seek care in the coming years. Specifically, the comments alluded to how patients are increasingly undertaking elective surgeries, routine care visits, and other healthcare services that they previously deferred due to the Covid-19 pandemic and social isolation measures. As more people actively pursue this care, insurance companies are expected to lower their guidance on anticipated profits, which may eventually also translate to higher premiums and insurance costs for everyday consumers.
Indeed, many people deferred their care during the pandemic due to fear of contracting the virus in hospital settings. However, retrospective analyses indicate that this deferred care actually caused worse healthcare outcomes for many people, increasing overall patient acuity and average length of (hospital) stay by nearly 10%.
Fortunately, there may potentially be some respite for these costs with technology. Specifically, digital health tools and new modalities of care may help alleviate some of the cost burdens, though will take time to truly integrate into the healthcare system.
For example, telemedicine has been touted as one opportunity to significantly reduce overhead costs, as patients can access their healthcare services directly from the comfort of their own homes. Furthermore, telemedicine can also help increase access to care for people that otherwise may not be able seek it, mitigating further delays in care which would yet again, lead to increased downstream costs. Many companies are also leveraging technology to make the patient journey more convenient. For example, companies are now offering at-home diagnostic solutions, through which patients can test themselves for common conditions and ailments at home— creating some savings on overhead costs, yet again.
These are just a few examples of how technology and innovation are trying to increase access to care and ease care delivery, while also preventing excessive costs. Nonetheless, a healthcare cost crisis is looming—and regulators, policy makers, and innovators must act now, before it becomes too late.