YERGER: Healthcare Costs Continue to Rise, But What’s the Solution?

By: Scott Yerger

     Healthcare spending is reaching unprecedented levels, with national expenditures projected to surge to $8.59 trillion by 2033, accounting for more than one-fifth of the total U.S. economy. While medical innovation continues to reach new heights, the financial burden on employers, families, and public health systems is creating a critical affordability crisis.  Addressing this challenge requires a dual understanding of the modern drivers behind these spikes and the emerging strategies designed to stabilize the system.

The Modern Drivers of Healthcare Inflation

     Rising costs are no longer just a byproduct of general inflation; they are increasingly driven by a unique set of structural and pharmacological factors.

•     The "GLP-1" and Specialty Drug Explosion: Demand for GLP-1 medications (like Ozempic and Wegovy) has tripled since 2020. These drugs, often costing $1,000 per month without insurance, are intended for long-term use, creating a massive, ongoing expense for health plans. Furthermore, specialty drugs now account for roughly 50% of total drug spend, driven by expensive gene therapies and oncology treatments that can cost millions per dose.

•     The Aging Population & Chronic Disease: Approximately 90% of all healthcare spending in the U.S. is dedicated to managing chronic conditions like heart disease, diabetes, hypertension and chronic kidney disease (CKD). As the baby boomer generation ages, the demand for geriatric and long-term care is placing extreme pressure on infrastructure and labor.

•     Labor Shortages & Systemic Inefficiency: Healthcare labor accounts for 56% of hospital expenses. Persistent shortages of nurses and physicians are driving up wages, and these costs are being passed directly to insurers and employers through higher reimbursement rates.

The Healthcare Cycle

Strategies to Contain and Manage Costs

     To bend the "cost curve," stakeholders are shifting away from traditional models toward more active, value-based interventions.  Creating a more informed “healthcare consumer” by educating patients on the importance of preventative medicine and healthy lifestyle choices remains a major goal.  Other industry trends show significant promise in the drive to lower overall costs.

1. Transition to Value Based Medicine: Unlike the traditional "fee-for-service" model that rewards the volume of visits, value-based care aligns payments with patient recovery and health outcomes. By prioritizing primary care and prevention, providers can avoid expensive emergency room visits and hospital readmissions.  Unfortunately, many financial incentives for physicians are still based on volume or productivity targets.

2. Expanding Telehealth and Digital-First Care: Telehealth has emerged as a major cost-containment tool, often reducing the cost of an initial condition evaluation by $82 per person compared to in-person visits. Digital platforms for musculoskeletal (MSK) care and chronic disease management allow for remote monitoring, which can prevent minor issues from escalating into surgical cases.

3. Pharmacy Supply Chain Reform: Employers are increasingly "carving out" pharmacy benefits from their main insurance carriers to gain better transparency into pricing. Strategies include requiring prior authorization for high-cost drugs, encouraging the use of biosimilars, and implementing mandatory mail-order programs for maintenance medications.

4. Promoting "Consumerism" via HSAs and Transparency: High-deductible health plans (HDHPs) paired with Health Savings Accounts (HSAs) encourage patients to be more cost-conscious. When combined with transparency tools that allow patients to compare prices for MRIs or elective surgeries, these plans can significantly reduce overspending on routine services.

     If you are an employer looking to optimize your benefits, I can help you analyze specific cost drivers in your current plan or suggest vetted Telehealth partners that specialize in high-impact areas like mental health or MSK care.

     Large regional health systems are leading the charge through specialty and sub-specialty care integration but the patient as consumer stills hold a significant opportunity to take a bite out of rising costs.

YERGER: Healthcare Costs Continue to Rise, But What’s the Solution?