Rising Health Care Prices Increase Pressure on Employers to Manage Costs

According to an Altarum report, while health care prices have been lagging overall inflation, recently-released July price data reveal we may be at a key inflection point for private-sector insurance prices for health care services.

Medicare and private-sector prices diverged substantially in July because Medicare reimbursement rates are statutorily set and mandated sequestration cuts for Medicare provider payments triggered in April and July.

Private-sector prices jump while Medicare prices fall: Private-sector prices increased substantially in July, up a full percentage point from the previous month and 5.4% higher than the price levels in January 2021.

Expect higher prices in 2023. Recent comments from providers and insurers indicate 2023 negotiations are generally favoring providers.

Outlook: The divergence between Medicare and private prices has increased 7.2 percentage points in the past eighteen months and is likely to expand further over the next five years as Medicare begins to negotiate drug prices. Managing health care costs will become even more important in this environment.