The cost of healthcare continues to rise in 2024 across the United States. New technologies, rising coverage premiums, and talent shortages all contribute to the increasing cost of caring for and providing the right treatment to patients.
While physicians and medical administrators are not directly responsible for many causes of soaring health costs, a collaborative approach with policymakers could help bring costs back under control.
Current Key Drivers of Rising Healthcare Costs
Post-pandemic inflation continues to have a ripple effect, impacting multiple aspects of the economy. For the healthcare sector, this affects the cost of technology and its components, drugs, and multiple aspects of the supply chain. According to McKinsey, the current inflation rate indicates a rise in healthcare costs of $370 billion by 2027.
That inflation applies to another ever-increasing cost— the rising demand for new technologies. Integrating AI, machine learning, and automation (e.g., for invoicing and insurance claims) has added new burdens to overstretched budgets.
Those budgets are already stretched to the limit, partly because of an aging population. While it’s good news that people are living longer, the increasing demand for late-life and elderly care is another aspect of rising health costs.
The relevant care staff that helps handle those demands are also in short supply, as are many other categories of qualified healthcare professionals. The continuing shortage of physicians and nurses impacts healthcare facilities of all types. As more of the aging workforce retires and others leave their professions due to stress or family commitments, the remaining pool of qualified healthcare professionals can command higher salaries.
Impact on Patients
All these factors ultimately impact patients and impinge on positive outcomes. People may suddenly have to pay more out-of-pocket costs, or their health insurance doesn’t cover prescription drugs. They may also find that co-pays increase, reducing the value of their health coverage.
The shortage of personnel also impacts how easy it is for patients to access the care they need. While the rising costs of certain treatments and procedures make them inaccessible to low—and middle-income families, talent shortages affect everyone. Fewer nurses, for example, means patients may need to wait longer for the required care. The disparity in pay between healthcare employees can also lead to gaps in care that directly impact patient well-being.
Effects on Healthcare Providers
Ultimately, these problems lead to significant financial strains on hospitals and other healthcare facilities. Rural settings are particularly heavily impacted by the cost and logistics of keeping up with advancing healthcare needs. Over 100 rural hospitals have closed over the last decade, but in 2024, around 700 are in danger of closing due to unmanageable costs. Further closures could create a healthcare crisis in these rural areas, meaning patients must travel significantly or fail to receive the necessary care.
Hospitals in all areas are also experiencing recruitment challenges—after all, there’s a limited pool of qualified healthcare personnel to hire from. Some healthcare organizations utilize holistic recruitment strategies and integrate technological solutions to attract top talent and aid in patient management.
Technology can also help manage health costs. The rapid expansion of telemedicine during the pandemic showed that there are more ways to engage with patients than face-to-face consultations. Advancing telehealth technologies is helping to fill the gaps caused by talent shortages, optimizing budgets for multiple healthcare entities.
Potential Solutions and Mitigation Strategies
Utilizing technology and smart recruitment strategies are just a couple of ways to help manage these rising health costs. Many healthcare facilities and individuals seek the government to cap costs or expand Medicare and Medicaid coverage to support more people.
There’s also a shift from volume-based to outcome-based care models. Rather than focusing on how many patients are treated, value-based care works on prevention and creating lasting value and positive patient outcomes.
Technology, in particular AI, has a role to play here. Wearable devices and advanced diagnostics help with early intervention and can move patients toward healthier lifestyles and less costly treatment programs. However, AI boosts budget management in other ways. Predictive personnel management can help plan schedules that optimize staff availability while improving well-being and reducing stress. Automatic invoicing ensures money isn’t left on the table, while insurers can use AI to perform more in-depth and faster risk assessments.
Take a Collaborative Approach to Manage Rising Healthcare Costs
While each of the strategies highlighted above can address certain aspects of rising health costs, serious changes will require a fully collaborative approach. Policymakers must listen to the needs of hospitals and other healthcare providers, and everyone should ensure that care choices remain patient-centric and affordable for all for a healthier, happier population.
For more industry-related news, bookmark the MRINetwork insights page.