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Healthcare costs expected to rise in 2022, with lingering pandemic-related costs, new report says

The Plain Dealer  Cleveland logo The Plain Dealer Cleveland 7/8/2021 Julie Washington, cleveland.com

CLEVELAND, Ohio — The long-tail of the COVID-19 pandemic will likely mean higher costs for healthcare to both consumers and insurance companies next year, according to a new report from Price Waterhouse Cooper’s Health Research Institute.

Subtracting out the effects of the pandemic on health care spending in 2019 and 2020, the institute projects a 6.5% increase in total spending next year. This exceeds annual increases that had ranged from 5.5% to 5.7% ahead of the pandemic from 2017 through 2019.

Among the culprits for the expected increase next year:

  • Rescheduling of medical appointments postponed during the pandemic.
  • Increased mental health issues.
  • An overall decline in Americans’ health tied to lifestyle changes during the pandemic.

Price Waterhouse Cooper’s annual report projects a 6.5% increase in healthcare spending next year. That is lower than the 7% projection for 2021, yet higher than the 6% for 2020, and higher than the 5.7%, 5.%% and 5.5% in the years leading up to the pandemic.

Extra costs will be borne by employer-sponsored healthcare insurance and consumers, but healthcare innovation that saves money could help reduce the burden, said Trine Tsouderos, Health Research Institute regulatory center leader.

“There’s a lot of different things that employers and insurance companies can do to blunt that increase in cost, so it depends on your own employer and insurance company, and how they decide how much of that 6.5% trickles down to all of us,” Tsouderos said.

Price Waterhouse Cooper’s Health Research Institute annually projects the growth of employee or medical costs in the coming year and identifies the leading trend drivers.

The resulting report, titled “Medical cost trend: Behind the Numbers,” looked at not just healthcare prices but also the cost of healthcare services, procedures and prescription drugs, Tsouderos explained. The report focuses on employer-sponsored healthcare insurance, not Medicare or Medicaid.

The report bundled those costs into something it calls medical cost trend, defined as the projected percentage increase in the cost to treat patients from one year to the next, assuming health insurance benefits remain the same.

Insurance companies may use the projection to help calculate health plan premiums for the coming year. The medical cost trend projected in the report is applicable to employer-sponsored insurance, but not individual coverage purchased on the Affordable Care Act exchanges, Price Waterhouse Cooper said.

Actual premiums will vary by region and state, industry and even individual employer. The timing of when those premiums are set also varies, the company said. Some employers have already set their premiums for 2022, while others will be finalizing them over the summer and into early fall.

Typically, spending data from the prior year is used as an input in the projection. For 2021 and 2022, the medical cost trend is the projected percentage increase over the prior year’s spending, with the effects of the pandemic removed from the prior year’s spending.

Healthcare spending by employers in 2020 was lower than expected, in large part because people skipped routine care and elective surgery because of the COVID-19 pandemic.

The Price Waterhouse Cooper survey is based on interviews with 31 health benefit experts and health plan actuaries; 450 employers across 35 industries; 1,362 physicians, physician assistants, nurse practitioners and other health care providers; and 2,511 American adults.

“Because we have this kind of really kind of broad view, we’re able to say quite a bit, year to year, about changes in the healthcare system,” Tsouderos said.

Price Waterhouse Cooper’s report also identified gene therapies and cybersecurity as among the trends that may or may not add to healthcare costs in the future. Other trends, such as consumers shopping for care and telehealth, are expected to help keep healthcare costs in check because they allow healthcare systems to provide more care at a lower cost, the report said.

Here’s a look at some of the trends projected to affect medical costs in 2022, according to the Price Waterhouse Cooper survey:

Care deferred during the pandemic returns: Even when doctor and dentist offices reopened in 2020, many people still did not feel comfortable returning for routine health care.

Skipped wellness visits won’t be made up, so that kind of deferred care won’t impact healthcare spending in 2022, she said. But an increase in the number of elective procedures is expected to increase the medical cost trend for 2022. Postponed care also leads to cancers and chronic conditions that are discovered later, leading to more spending and worse outcomes, Tsouderos said.

COVID-19 costs are likely to persist: The large numbers of Americans who had severe cases of COVID-19 and now have long-term health problems will add to healthcare costs, in addition to the ongoing costs of COVID-19 testing and administering the vaccine.

Increased demand for mental health services: Multiple national surveys have shown that the pandemic increased depression, anxiety and substance abuse, causing health care costs to climb.

“The demand for mental health services is increasing a lot, and our research is showing that we should expect that to not only increase medical cost trend for next year, but also to continue into the future,” Tsouderos said. “There’ll be a long tail on that one, for sure.”

Population health worsened during the pandemic: Increased smoking and substance abuse, along with less exercise and poor eating habits, may result in the deterioration of Americans’ health and increased healthcare spending, the survey said.

Preparing for the next pandemic: Hospital systems are getting ready for the next pandemic or natural disaster by investing in staffing, PPE, forecasting tools, supply chain and infrastructure changes.

“They’re investing in forecasting (and) scenario planning, so that they can understand, the next time a disruption happens, what they need to do and to set up systems so that they can quickly fix those shortages,” she said. “We’re going to see these investments most likely reflected in (health care) prices, because all that cost has to be absorbed by the system somehow.”

The rising number of gene therapies makes this a healthcare trend to watch in the future, the survey said. On average, insurance covers a larger portion of prescription drug spending than a decade ago, while drug costs paid by consumers has stayed about the same in recent years.

“I think a lot of insurers and employers are looking at the pipeline of these (gene therapies), and wonder what this will mean for us and how will these be paid for,” Tsouderos said. “That still remains an open question that has not been resolved in any real way.”

Hospitals and other health care organizations tend to be targets for ransomware, leading to spending on cybersecurity, she said.

“There’s always investment year to year in cybersecurity, and those costs are baked into medical cost trends,” Tsouderos said.

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