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COVID-19 Expected to Cause Increased Health Spending in 2022

Written by Sam Lieberman | Nov 30, 2021 4:00:00 PM

COVID-19 has impacted healthcare in a way we haven’t seen before. Aside from the obvious increase in inpatient visits and emergency care, it has also shifted how we receive care, who we receive care from, and the overall cost to be treated. The pandemic is likely far from over, and we’re continuing to see industry changes resulting from the past two years. 2022 prediction reports confirm that we’re entering a new era of healthcare, and providers and patients should be prepared for an increase in cost and spending.

Industry Changes to Increase Healthcare Costs

For the past 2 years, Americans have tried to live a normal life while dealing with a deadly virus, the loss of loved ones, and an overwhelming amount of stress. The healthcare system rarely makes institutional adjustments, but in less than 2 years’ time, we have shifted to an almost totally digital platform. Doctors’ visits are held via video and phone, and a lot of in-person care is reserved for emergencies or special treatments.

Healthcare providers are investing a lot of money into software, security, and proper equipment to provide the same level of care in the new virtual landscape. Mercom Capital Group’s 2020 Digital Health Report revealed that in 2020, telemedicine was the top-funded category. Digital Health overall set records with a whopping $21.6 Billion in funding. While digital tools have the potential to decrease spending in the future, for now, the necessary investments could lead to a rise in insurance premiums and healthcare visits.

COVID’s Impact on American’s Health

Since the start of the pandemic, we’ve seen a huge surge in healthcare treatment. Healthcare providers have been challenged with a high caseload of infected patients that often require weeks of treatment. Aside from COVID positive individuals, institutions are having to account for testing materials, vaccines, and aftercare for “long term Covid”. COVID is without a doubt the main inflation factor for 2022, and these costs are expected to continue increasing as the virus mutates. The industry is not only being called to prepare for a worsening pandemic but the potential for other complex pandemics in the future.

Mental health is another area driving increased healthcare costs. According to a recent report, close to 50 percent of adults report having symptoms of anxiety and depression due to COVID. It’s no surprise that American’s are struggling with high stress, anxiety, and depression. There are even cases of PTSD arising due to COVID that need complex therapy treatments. Its widely known that emotional stress can lead to physical ailments, and American’s are seeing a steady rise in these types of cases. Substance abuse has increased, mental agility and satisfaction have decreased, and overall the industry needs to account for a surge in mental health visits and corresponding pharmaceutical treatments.

Physical health has also decreased during COVID times. People are spending the majority of their time inside, not exercising, and eating more unhealthy foods. These habits can be detrimental to health and have led to an increase in spending for “lifestyle conditions” such as acid reflux, depression, obesity, gastrointestinal conditions, migraines, heart disease, etc.

Substance abuse has increased, mental agility and satisfaction have decreased, and overall the industry needs to account for increased mental health visits and pharmaceutical treatments.

Pharmaceutical Drug Spending to Increase

Pharmaceutical spending for mental health isn’t the only drug cost to take into consideration. Vizient recently released their Pharmacy Market Outlook in which they announced their prediction of a 3.10% increase in total drug spending by hospitals and health providers. Their predictions are of course heavily based on the FDA’s approval of emergency and non-emergency COVID vaccines, as well as COVID treatment drugs. COVID-related drugs rank third in terms of total industry spending, with oncology drugs coming in first. Vizient also reported a suspected 4.68% cost increase for specialty pharmaceuticals that require a special prescriber.

On the bright side, predictions looking farther ahead to 2023 are more promising for providers. With a focus on introducing biosimilar candidates to costly medications, a successful introduction has the potential to decrease drug costs in the future. For the year ahead, however, rising drug costs will remain a relevant concern.

Deferred Care Costs

There is also an expectation of increased costs for care that was put off during the pandemic. A lot of Americans in need of specialty care were forced to reschedule their treatments until the pandemic settled down. According to the PwC Health Research Institute, 15% of Americans with employer-sponsored insurance plans deferred scheduled care between March and September 2020.

PwC Health Research Institute reported that these procedures and treatments are expected to have a higher cost in 2022 compared to 2020. Things like knee surgery, sinus surgery, cancer screening, pre-diabetes care, and other “non-emergency” care count for the increased cost and spending for 2022.

Acute Care Costs

Where benefit packages often offer reimbursements or affordable co-pays for certain medications, medications given during an in-patient hospital visit are typically ineligible for a reduced cost. Providers are implementing generic alternatives and comparable treatments, however, there should still be an expectation of higher prices for providers or patients in 2022.

Though research and sourcing for the alternatives are active, it’s unlikely that the benefit of the lower-cost options will be felt this year. This sort of complication is important for people who expect to take medications during the upcoming year. While a benefits plan may cover the drug, the co-pay could be extremely high.

Looking ahead to 2022

For most Americans and their employers, healthcare is a huge cost expense. For those in retirement without employer benefits, health insurance tends to be an especially significant portion of their budget. To find the best plan and coverage, you want to look out for the upcoming coming changes to the market.

  • By 2022, the open enrollment period is likely to be extended. This implementation is likely due to the desire to accommodate a large influx of policy changes or plan details. You should still enroll by December 15th if you want coverage effective Jan. 1.
  • Overall premium plans may decrease, while certain states may see a modest increase. Be sure to check plan details as some lower-cost plans may have much higher co-pays, higher deductibles, or exclusions to specific medications or treatments.
  • Emergency care is going to be covered in most plans at no additional cost than in-network plan costs

The increase in drug prices, healthcare industry costs, and digital investments are not necessarily permanent. Once the initial adjustment period to this new healthcare landscape is over, a re-balancing of treatment costs and premiums is to be expected. For now, thanks to a grueling pandemic that called for massive upheaval, employers and providers should expect to increase their healthcare budget for the foreseeable future.