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The pandemic has shifted how and where Americans gain access to care, a shift large enough to influence multiple aspects of price and utilization and, thus, medical cost trend. The aftereffects of the pandemic and the health system’s response to changes and failures observed during the pandemic are expected to drive up spending (inflators) in 2022. At the same time, some positive changes in consumer behavior and provider operating models that occurred during the pandemic are expected to drive down spending (deflators) in 2022.
PwC's Health Research Institute (HRI) is projecting a 6.5% medical cost trend in 2022, slightly lower than the 7% medical cost trend in 2021 and slightly higher than it was between 2016 and 2020. Healthcare spending is expected to return to pre-pandemic baselines with some adjustments to account for the pandemic’s persistent effects.
HRI defines medical cost trend as the projected percentage increase in the cost to treat patients from one year to the next, assuming benefits remain the same. 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.
The pandemic’s long tail may increase utilization and healthcare spending in 2022 thanks to the return of some care deferred during the pandemic, the ongoing costs of COVID-19, increased mental health and substance use issues, and worsening population health.
Calls to prepare for the next pandemic are as certain as its eventual arrival. Preparation costs money; pandemic readiness likely will be an inflator of medical cost trend in 2022. The US health industry is planning, or embarking on, investments in forecasting tools, supply chain, staffing, PPE and infrastructure changes. Because of these investments, payers and employers are bracing for rising prices.
The pandemic accelerated providers’ improvements in digital experiences so they could maintain their relationships with patients through the challenge of COVID-19 while reaching new segments. Providers are fine-tuning “digital front door” mobile apps that connect them to their patients, beefing up portals and intensifying use of customer relationship management (CRM) tools. They are using virtual care and analytics to not only improve the customer experience and create regular touchpoints with patients, but also to expand capacity to avoid frustrating or alienating patients. HRI expects these digital investments in the patient relationship to expand consumers’ access to care, increasing utilization and medical cost trend in 2022.
Employers and payers have been nudging people toward lower-cost sites of care over the past few years through care advocacy programs, benefit and network design, and lower copays or coinsurance. Now consumers may need less nudging. More people are shopping around for care, according to a recent HRI report, and millions of consumers became familiar with receiving care in lower-cost, more convenient ways during the COVID-19 pandemic. HRI expects these shifts in consumer behavior to reduce healthcare spending in 2022.
Where just a year ago health system leaders could not imagine a distributed “at home” workforce, they were quickly forced to improvise during the pandemic. Patient care had to be delivered remotely, and centralized functions like the business office were moved to employees’ homes. It was a necessary pivot for the times that revealed a new way of working, one that can improve employee satisfaction while responding to employer pressures to reduce costs in 2022.
Not all trends are new or clearly inflators or deflators of the medical cost trend but they are important enough influencers to watch. These are the top items HRI will be following over the next year to see how they influence the medical cost trend:
US Health Industries Leader, PwC US
US Health Services Leader, PwC US
US Pharmaceutical and Life Sciences Leader, PwC US