As the 2024 presidential election approaches, the rival campaigns have promised to “lower costs” on healthcare for people living in the United States. Unfortunately, whether the winner after Nov. 5 is Vice President Kamala Harris, the Democratic nominee, or former President Donald Trump, the Republican standard-bearer, people will have to wait for their healthcare costs to decrease.
Healthcare costs are set to rise between 7% and 8% in 2025, according to a new report from PricewaterhouseCoopers’s Health Research Institute. The projection is for 7.5% in the individual market and 8% in the group market. A separate report from professional services firm Aon found that employer healthcare costs will rise 9% in 2025, surging to $16,000 per employee.
Inflationary pressures continue to push healthcare costs higher. Ironically, healthcare costs dipped during the COVID-19 pandemic as people visited doctors less and hospitals put off various surgeries and treatments to reduce the risk of people contracting the virus. While year-over-year inflation continues to decline, the cumulative inflation rate from 2020-2024 is 22%. Those increases include healthcare as people resumed regular doctor visits and hospitals returned to everyday care and surgeries.
Another factor is the increased use of glucagon-like peptide-1 (GLP-1) drugs to treat obesity and Type 2 diabetes. The drugs, sold under brand names such as Wegovy and Ozempic, have become popular over the last several years due to their effectiveness; the demand for such drugs surged 87% in 2023, according to Aon. For some time, the demand was so great that it created shortages of the drug, resulting in long delays for people to obtain their treatment, thereby increasing costs further. According to the report from PwC, the cost to employers per member on GLP-1s has risen steadily over the past several years. In the first half of 2023, it was $23.16 compared to $8.99 in 2021, an increase of more than 250%.
Drugs to treat central nervous system conditions like Alzheimer’s or Parkinson’s disease did not provide much benefit in the past. However, rapid innovation and advances in medicine have brought some promising treatments to market. In July, the Food and Drug Administration approved Kisunla (donanemab-azbt), an amyloid-targeting therapy for Alzheimer’s disease. In one 18-month study, researchers found that patients who took Kisunla declined in memory and cognitive ability about 22% more slowly than those who received no infusion. While the drug doesn’t cure or reverse Alzheimer’s, the 12-month cost before insurance is $32,000. Such advances will bring cost challenges.
Cuts to Medicare Advantage plans by the Biden administration have also contributed to higher costs. Medicare Advantage plans, of which nearly half of the seniors are enrolled, are private plans offered as a supplement to Medicare. They offer additional benefits such as dental and vision care. Also, out-of-pocket costs tend to be lower than in traditional fee-for-service Medicare. In 2023, the Biden administration restricted plan marketing and cut payments to insurers on average by 1.1%. Payments will be reduced by another 0.16% beginning next year, with seniors getting notified shortly before Election Day. As a result of the reduced payments, insurers have had to increase costs in the form of higher premiums and copays.
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Finally, health insurers have begun to reassess their healthcare plans’ total cost of care. Traditionally, providers have examined operational costs and administrative tasks as a means of reducing costs. That approach doesn’t address the broader scope of underlying concerns and challenges in the marketplace, such as government involvement in setting drug prices and the continued aging of the baby boomer generation. Analysts for PwC said, “By executing this holistic approach through a dedicated function, health plans are striving to moderate medical cost trends and improve affordability by reducing over-utilization, improving the efficiency of operations, and enhancing the effectiveness of medical management operations.”
While the Trump and Harris campaigns will point fingers at each other over healthcare from a 50,000-foot view with accusations of cutting Medicare, repealing the Affordable Care Act, and taking on Big Pharma, they’re not offering much in the way of policy proposals or solutions to slow the growth of healthcare costs overall. Whoever wins in November will have to address it as the bills come due.
