Medical cost trend: Behind the numbers 2022

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.

Where is the medical cost trend headed 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.

Inflator: The COVID-19 hangover leads to increased utilization

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.

  • Some care deferred during the pandemic returns - Healthcare spending by employers in 2020 was lower than expected, in large part because of the deferral of care as a result of the pandemic. Some of this care is expected to rebound in 2022, and some of it likely will increase healthcare spending.
  • COVID-19 costs are likely to persist - The costs of testing for COVID-19, treating patients and administering vaccinations for the disease likely will continue into 2022.
  • The mental health and substance use crises show no signs of waning - The pandemic substantially increased demand for mental health services. Increased substance use also likely will increase healthcare spending in 2022.
  • Population health worsened during the pandemic - Poor pandemic-era health behaviors such as lack of exercise, poor nutrition, increased substance use and smoking may lead to deterioration in US population health and increase healthcare spending.


  • Payers and employers - Go beyond analyzing the impact of worsening population health on spending. Model how the pandemic may worsen health and, in turn, increase healthcare spending for different individuals based on their health status. Use machine learning to proactively target interventions that could help prevent and mitigate worsening health. Consider investing savings from lower-than-expected healthcare spending in 2020 in disease management programs, expanded mental health benefits, or nutrition and exercise discounts/programs that could help mitigate or reverse some of the fallout of poor health behaviors and isolation of the pandemic.
  • Providers - Be proactive and personalized to get patients back in for care. Personalized or targeted outreach could help encourage patients to schedule necessary care, or even their vaccine. The need for SARS-CoV-2 booster shots or an annual vaccine also could create an opportunity for a more meaningful interaction between patient and provider.
  • Pharmaceutical and life sciences companies - Work with payers and employers to secure reimbursement for digital therapeutics for mental health, and meet a growing market need. Young adults aged 18 to 24 were more likely to say they were experiencing anxiety or depression as a result of the pandemic. They also were the most likely to choose telehealth for mental health services of any age group, and may be more willing to use digital therapeutics. Securing reimbursement from payers could improve consumer uptake of digital therapeutics. And FDA approval or clearance could help secure reimbursement.


Inflator: The health system prepares for the next pandemic

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 health system invests in better forecasting and the supply chain - After experiencing supply chain shortages and disruptions, the majority of provider executives surveyed by HRI in 2020 said they expected to spend money on predictive modeling in 2021. Pharmaceutical and life sciences companies also likely will address the supply chain.
  • Providers spend more on staffing and safety measures for all - Prices for personal protective equipment (PPE), infrastructure and staffing such as nursing also have risen. Investments also are being made in infection control. Investments in remote workforces, such as technology, connectivity and cybersecurity, also could ensure the organization is ready, in part, for the next crisis.
  • The health system addresses health disparities highlighted by the pandemic - The US health industry continues to invest in addressing health inequities. These investments likely will dampen healthcare spending in the long run but may drive higher prices in the short term. The pharmaceutical and life sciences industry is working toward greater racial and ethnic diversity participation in clinical trials, a critical need amplified by the pandemic. Health organizations also have allocated millions toward addressing the social determinants of health (e.g., transportation and housing). Increased costs to support these programs in the short run could result in savings long term.



  • The health industry - Embrace cross-industry collaboration. Organizations should invest in real-time data collection and reporting, and embrace interoperability.
  • Payers and employers - Take an active role in addressing racial health disparities. Large employers are prioritizing equity, diversity and inclusion as part of their health and well-being strategy. Payers also have a role to play to help set direction and establish strategies to promote health equity across their lines of business.
  • Providers - Develop an “end-to-end” view of the supply chain, including the last mile to the consumer. This includes developing sophisticated views of consumer preferences that could help ensure that the right services reach people at the right time in the place they choose.
  • Pharmaceutical and life sciences companies - Double-down on preparation for SARS-CoV-2 variants or the next pandemic. Develop repurposed therapeutics and new vaccines, establish incremental vaccine manufacturing capacity without impacting historical supply needs and be a good global citizen by providing production to regions outside of one's nationality. Consider investing in R&D animal models, chemistry, manufacturing and control development and policy development so that when the next crisis hits, companies will have a short time to clinic.


Inflator: Digital investments to enhance the patient relationship increase utilization

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.

  • Patients and clinicians expect useful digital tools as part of the care journey - Before the pandemic, digital investments to improve the way patients and clinicians engage with the health system and each other may have been tabled by provider leaders in favor of other needs. The crisis exposed how vulnerable healthcare organizations were without them. In the short term, these investments cost money, but they may pay off in the long run.
  • Investments in digital tools can help health systems better engage patients and expand capacity - Health systems are looking to build stronger, more continuous relationships with their patients that enable growth. Investments in virtual care, analytics and CRM tools can build better relationships and drive growth.

  • Payers/Employers - Use digital tools to achieve more continuous care for members. CRM and other digital health investments can help support the evolution of members’ interactions with their providers beyond once-a-year, isolated check-ins. Payers can tap the full potential of CRM tools to identify the points in a patient journey where outreach or interventions could result in better care for chronic conditions, and coordinate with providers on needed outreach or interventions. Foundational investments in chatbots and automation also can help smooth the experience of members trying to get information on their plans and healthcare costs.
  • Providers - Seize opportunities to better navigate the patient experience, starting with vaccine appointments. Convenient, simple, intuitive processes are rewarded with kudos and gratitude online, highlighting the need for providers to invest in their digital front door in an increasingly virtual care delivery world. As new federal interoperability rules push healthcare organizations toward more data sharing, organizations also have an opportunity to use those new data streams to build dynamic models that produce important patient insights. However it’s important they feed those tools with clean and accurate data.
  • Pharmaceutical and life sciences companies - Understand the hybrid virtual/in-person environment to best support patients and physicians. Seventy-seven percent of provider executives surveyed by HRI in 2020 said the pandemic had negatively affected their organization's ability to engage with pharmaceutical sales representatives. Communication in a post-pandemic world likely will be a mix: 78% of provider executives indicated that they would like to communicate with pharmaceutical field representatives in person, while 71% said they would like to use virtual video meetings. As vaccination rates rise, cases fall and policies limiting in-person contact are loosened, pharmaceutical and life sciences companies will need to navigate the fluid preferences for pharma-clinician interaction and adapt accordingly.

Deflator: Consumers lean into lower-cost sites of care

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.

  • Consumers increasingly embraced care outside of the doctor’s office during the pandemic - The share of Americans using health settings outside of the traditional doctor’s office or hospital soared during the pandemic. And the “house call” of the past is also taking on new life.
  • The emergency department (finally) becomes the last resort - The COVID-19 pandemic deflated emergency department (ED) utilization. Even a small decrease in utilization can have a significant impact on bending the cost curve for employers. Some ED visits - especially lower acuity ones - may never return to pre-pandemic levels.


  • Employers - Make sure the care options available to your employees meet evolving preferences and needs. Employers should continue to encourage appropriate utilization through plan design and effective communication.
  • Payers - Offer accessible, effective alternatives to the ED, and integrate them into primary care. Integrating telehealth, urgent care and other visits used in place of ED visits back into primary care will be important to lowering spending and improving members’ health.
  • Providers - Help patients get the most out of lower-cost sites of care. To get the most value out of the shift to virtual care, patients need affordable access to at-home, medical technology that will facilitate their visit. Providers should have education strategies that shorten the learning curve for patients and ensure efficiency, accuracy and quality. With dwindling ED volumes, providers will need to either address fixed cost structures or increase prices, which employers will surely resist. Continued investment in tele-ED capabilities will also be critical to lower ED utilization post-pandemic.
  • Pharmaceutical and life sciences companies - Rethink diagnostics in light of virtual and at-home care trends. Consumers are warming up to at-home, do-it-yourself testing. Investment in at-home medical kits that help facilitate virtual exams also will be important. Traditional diagnostics makers may need to redesign their target product profiles, focusing on usability and reproducibility in their results. Pharmaceutical and life sciences companies should consider growing their relationships and partnerships with at-home care providers if more patients start to prefer this setting for things such as infusions. Pharmaceutical and life sciences companies should continue to offer digital apps and therapeutics that enable consumers to monitor their biometrics and symptoms at home.


Deflator: Health systems find ways to provide more healthcare for less

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.

  • Health systems can reduce costs through new ways of working - The shift to remote work for some healthcare employees could help reduce costs. Health systems are starting to rethink their real estate spending, too. HRI expects more health systems will revisit how much real estate they need for administrative functions, especially as they increase work-from-home options and reconsider the allocation of space between business functions that typically do not generate revenue and patient care that does.
  • Health systems can increase efficiency through process automation and cloud technology - Technology-based efficiencies also are being adopted by providers to reduce costs and boost revenue. Cloud services also are growing in popularity as they reduce the physical space and fixed assets of health organizations. They also are an enabling technology that allows employees to work from home.


  • Payers - Use technology to reduce your medical and administrative costs. Payers should invest in the data and analytics needed to decipher provider price transparency information and use it for network negotiations. Payers will also be subject to price transparency rules and must plan to accumulate and communicate the required information in a way that will benefit their members.
  • Employers - Understand what your health plan pays for services and how that compares to other health plans to push for better rates. Use provider pricing and quality data to build new, high performing networks for better value. Consider what collaboration tools you should add or refine to improve your own employees’ work experience.
  • Providers - Consider what cost-saving measures and back-office initiatives are right for your organization. While many organizations have been working remotely for a year, most have used makeshift collaboration tools and should consider investing in more permanent solutions. Lessons from the pandemic and cost-saving measures in administrative functions may set up providers to apply similar measures to improve the clinician experience and reduce costs in clinical settings. As providers consider these changes, they should apply human-centered design to increase the quality of those changes: consider how their clinicians actually perform tasks, identify pain points and engage clinicians in designing new ways to get the job done.


Healthcare trends to watch 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:

  • Drug spending - The pipeline of costly cell and gene therapies is only expected to increase. Use of biosimilars, a cheaper but still costly version of branded biologic medicines, has started to increase in the US. Employers are covering more of the increases in costs. On average, insurance covers a larger share of retail prescription drug spending than a decade ago, while consumers’ share has leveled off in recent years.
  • Cybersecurity - The costs associated with data breaches and ransomware attacks can be material, hindering an organization's ability to operate. While cyber attacks remain a big threat, determining how much to invest in mitigating that threat is not always simple. Forty-eight percent of health industries executives said that they are increasing their cyber budgets in 2021 (PwC’s 2021 Global Digital Trust Insights survey, Fall 2020). Companies also are using automation technologies to identify and respond to security events. Twenty percent of health industries executives surveyed by PwC said they were already seeing benefits from using artificial intelligence in cyber defense.
  • Surprise billing - An intra-industry squabble between payers and providers that often left consumers with unexpected medical bills has largely been put to rest with the No Surprises Act, which takes effect Jan. 1, 2022. The implications for employer healthcare spending are uncertain. The Congressional Budget Office said the law will lower premiums by 0.5% to 1% due to “smaller payments to some providers.” Others think the law could drive higher spending as costs shift from the consumer to the payer or employer, and the new costs of arbitration come into play.

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Gurpreet Singh

Gurpreet Singh

US Health Services Leader, PwC US

Glenn Hunzinger

Glenn Hunzinger

US PLS Leader, PwC US

In Sung Yuh

In Sung Yuh

Principal, Transformation, PwC US

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