The Truth Behind The Recent Rise Of Health Care Inflation

Due to a reduction in preventive, elective, and chronic disease care brought on by the pandemic, health care costs in the US have decreased for the first time in our lifetime. Health care costs, however, have since risen to pre-pandemic projections. Let’s explore some factors that have contributed to the rise of health care inflation.

Provider Costs Have Risen

Providers and hospitals are not immune to inflationary trends. Providers have to bear higher costs for medical supplies and fuel and will pass on these costs. The “Great Resignation” has also greatly affected health care. Hospitals experience staffing shortages, and “travel” nurse and agency costs have spiked. Such increases naturally raise the expenses for medical care and will lead to a rise in health care inflation in the near future.

Providers Will Have More Leverage At The Contracting Table

During the pandemic, weaker providers and hospital systems were more likely to fail, and their volume has probably been absorbed by more robust systems that benefit from higher reimbursement rate and negotiating leverage. Many health plan contracts are three years long or even more, so these increases could stretch through 2025 or beyond that.

During the pandemic, nurses and doctors are placed at great personal risk in merciless conditions with insufficient personal protective equipment. As such, during contractual disputes, health plans will be challenged in the court of public opinion, making them more likely to submit to the financial demands of providers.

Cost of Drugs Will Rise

The rise of drug prices also hasn’t slowed down during the pandemic, and the federal government hasn’t been successful in passing any legislation to control drug prices. Although there is a lot of public support for laws to mitigate the high cost of drugs in the US, there is little agreement among legislators on the actions that need to be taken.

Furthermore, the pandemic slowed down the research and approval for new drugs not targeted at Covid-19. Hence, there will be a rise in the number of new personalized drugs, as the pandemic eventually withdraws.

Chronic Disease Management, Preventive Care and Non-Emergent Surgeries Were Delayed During The Pandemic

Colonoscopy and mammography screenings fell sharply during 2020, along with cancer screening rates. Although the lesser cancer screenings lowered medical costs during the pandemic, this could increase future costs as more people are diagnosed with advanced-stage, high-cost cancers in the years that follow.

Although childhood immunization saves costs and lives by mitigating epidemics like measles, pediatric vaccinations decreased by 42 percent in 2020. While vaccination of preadolescents has recovered, adolescent vaccination is still moving slowly as it struggles to make up for vaccinations that were missed in the first year of the pandemic. Fewer children fully immunized will raise health care costs and cause illness and death.

There are patients who avoided or delayed medical care for chronic conditions like diabetes and heart disease during the pandemic, and many of them might have to bear higher costs from complications such as congestive heart failure and end-stage renal disease due to more advanced disease in later years. Some will never receive the non-emergency procedures they had to forego during the pandemic, but many surgeries or treatments that were delayed will be scheduled in the future.