Questions about the cost and value of care will continue to swirl
As healthcare continues to grab a bigger share of the nation’s gross domestic product, politicians and consumers will want to know why.
As editor of HDM for much of the last 10 years, I’ve traditionally received many emails from experts who want to proffer predictions on microtrends they expect in the New Year – for example, how artificial intelligence will influence care delivery or what will help manage healthcare staffing shortages. Everyone, it seems, can be Nostradamus in December.
I wanted to do more than just that as we enter 2025. Halfway through the 2020s, it seems to be an appropriate time to get a sense of where the industry is, where it’s going and where it needs to be. I wanted to focus on three important macrotrends that seem to be defining healthcare’s current direction.
The cost-value disconnect
The high and rising cost of healthcare in the U.S. has a matter of concern for decades. Despite that knowledge and various attempts to rein in costs, there’s been little impact on healthcare inflation.
The statistics are stark. In 2023 expenditures on healthcare grew by 7.5 percent, to $4.9 trillion, reaching 17.3 percent of the country’s gross domestic product, according to data from the Centers for Medicare & Medicaid Services. Medicare spending increased 8.1 percent to $1.03 trillion.
CMS foresees no slowdown in the growth of expenditures, estimating average annual growth of about 5.6 percent, thus consuming nearly 20 percent of GDP by 2032.
While the numbers are mind-numbing, there are many reasons why it’s difficult to constrain costs, partly because of the complexity of the current system and the many players who participate in care delivery or its management. While those multiple reasons may be valid, the bottom line is that healthcare appears to be basically immune from any efforts to restrain spending growth. Payer-side efforts have been futile, and value-based initiatives aren’t mature enough to demonstrate any braking ability.
The cost eventually winds its way back to the general population that consumes healthcare expenditures. The employer- and government-based programs that traditionally have provided healthcare coverage to consumers are rising in price, too, and the average family is less able to absorb the price. Insurance doesn’t offer enough of a buffer from rising deductibles or uncovered emergency expenses. In fact, more than a third (37 percent) of Americans say they can’t afford an emergency expense of $400, according to 2024 research from Empower.
The unaffordability of care and anxiety over capacity to handle its cost is a source of frustration for many Americans, especially when cost is juxtaposed against the perceived value and quality of care and their experience within the broader system, which many consider to be convoluted, confusing and frustrating to navigate.
In general terms, life expectancy in the U.S. lags that of other large and wealthy nations, according to research released early in 2024. In 2022, the CDC estimated life expectancy at birth in the U.S. was 77.5 years, down 1.3 years from 78.8 years in 2019, before the COVID-19 pandemic. The average life expectancy at birth among comparable countries was 82.2 years in 2022.
Rising resentment
Healthcare costs also color consumer perceptions of healthcare and quality. Affordability of healthcare varies among consumers – four in 10 consumers find their healthcare costs manageable, but couldn't afford to pay more, while three in 10 struggle with current costs, according to data from PwC’s 2024 U.S. Healthcare Consumer Insights and Engagement Survey.
The PwC survey notes that one impact of high healthcare cost is the propensity for consumers to delay care. It found that 28 percent of consumers skip, delay or stop care because they can’t afford it. Some 65 percent of consumers don’t seek care until care needs are urgent, raising the likelihood that the care needed to resolve worsened cases will be more complex and expensive.
Delays in care, contentious relationships with payers viewed as obstructing access to care and byzantine rules governing care delivery are exacerbating consumer anger at the healthcare industry. Workplace violence against healthcare workers predated the pandemic, experts note. The rate of injuries from violent attacks against medical professionals grew by 63 percent from 2011 to 2018.
In his column, Stewart Gandolf, CEO of Healthcare Success, attributes current rage against the healthcare industry to longer wait times, delayed elective surgeries, untreated health conditions, stricter health and safety protocols, misinformation about high-profile conditions and how to treat them, and rising medical bills.
This growing rage became evident after the December 4 murder of Brian Thompson, chief executive officer of UnitedHealthcare in New York. Without any immediate evidence, the initial perception of the murder was that it was a result of denials of coverage by UnitedHealthcare, one of the nation’s largest health insurers.
“Within minutes of the shooting early on the morning of December 4, commenters on social media did not hesitate to assume … that the assassin was seeking revenge on an industry that must have unfairly rejected a healthcare claim,” a Boston University Today article noted. The victim and his family “garnered little sympathy online.”
Indeed, a poll by NORC at the University of Chicago found that about seven in 10 adults say that denials for healthcare coverage by insurance companies, or the profits made by health insurance companies, bear at least a moderate amount of responsibility for Thompson’s death. By contrast, eight in 10 adults said the killer bears a great deal or a moderate amount of the responsibility for the death.
Can value-based care make a difference?
Value-based care models have been framed as a key approach to both improving quality and reining in costs. Several flavors exist, varying depending on the risk taken on by provider organizations, reimbursement incentives, and population health or capitation reimbursement.
Current data suggest that about 60 percent of U.S. residents are covered by value-based care payment models. In 2021, the Center for Medicare & Medicaid Innovation issued an ambitious goal to shift 100 percent of Medicare beneficiaries into an accountable-care relationship by 2030, which would provide a significant boost to value-based care.
While some VBC models have returned savings results, it has not significantly impacted rising healthcare costs. And among some consumers – particularly segments of the Medicare population – there’s distrust about whether they will consistently receive access to needed care from providers outside of networks.
No matter what the financial model, conceptions about cost and value will continue to loom as large challenges casting a shadow over the healthcare industry.