Why Health Care Plans Cost Projected to Rise 2023

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With inflation galloping along at 8.5 percent in September 2022, there are budgeting concerns for 2023. This is especially true when it comes to budgeting for health care costs. Health insurance rose 4.4 percent in 2022. And it looks like it’s only going to go higher.

Pharmaceutical costs are also a concern. Although there are some measures to stem the price increases for Medicare recipients, those with private insurance will probably see increases in their drug bills. How far will this go, and will health care keep pace or even outpace inflation?

Medical Plan Costs to Rise in 2023

Medical plans seldom renew at a flat rate. But in the last few years, increases have plagued businesses and individuals. The looming 2023 is no exception. According to Healthcare Finance, health care costs are expected to increase an average of 6.5 percent.

The Society for Human Resource Management confirmed this projection saying that because of “today’s volatile health market”, the projection could be between 5.6 to seven percent.

Currently, the average U.S. employer pays $13,020 per year for an employee’s health care coverage. A 6.5 percent increase will take the cost up to $13,800 per employee. And with the push to keep good employees, health insurance is a must-have benefit for recruitment and retention.

On average, employees pay for around 22 percent of the premium. Couple this with current inflation, and it makes for less disposable income.

Medicare Premiums to Decline for Some

From 2021 to 2022, Medicare Part B rose 14.5 percent. It went to $170.10. But for 2023, it will decline to $164.90. Part D, which is prescription drugs through private insurers, should decrease by 1.8 percent. But the other side of the story is higher copayments, coinsurance, and deductibles from private insurers.

Some insurers are changing drug classifications. In some cases, tier 1 drugs may move to higher tiers. This increases out-of-pocket costs.

Higher Income Medicare Beneficiaries Pay More

The Centers for Medicare & Medicare Services (CMS) has announced the income-related monthly adjustment amount (IRMAA) will increase. This surcharge is levied against those individuals earning $500,000 or more and couples earning $750,000 or more.

For Part D policies, the high end to monthly premiums is an additional $76.40 per month.

Prescription Drug Caps for Medicare

In 2023 drug pharmaceutical companies must pay rebates if drug prices rise faster than inflation. This applies only to Medicare and Medicaid recipients. There will also be a limit to insulin copays. The new limit is $35 monthly.

It doesn’t affect pharmaceuticals sold to those individuals under a company’s private health insurance plan or who have an individual plan. But according to the Kaiser Family Foundation (KFF), there may be some spillover if it results in slower price growth among pharmaceuticals covered by private insurance.

Escalating Health Costs Affect Premiums

According to the CMS, health care costs will increase to $4.3 trillion in 2021. For the COVID-19 pandemic year 2020, the number was $4.1 trillion. And 2019 had costs running at $3.8 trillion. Even 2018 was high at $3.6 trillion. So that’s a steady increase with no end in sight.

Health Care Costs and Inflation

Although health care costs are increasing, they are increasing at a lower rate than inflation. According to the Bureau of Labor Statistics, medical care costs increased by 0.7 percent from July 2022 to August 2022. And for August, year to year, health care costs rose 5.4 percent.

Hospital services encompassed the 0.7 percent increase. Prescription drugs made up a 0.4 percent increase, and physician services increased by 0.2 percent.

Proposed Reasons for Increased Health Care Costs

Mergers of hospitals and health care centers have diminished competition. For instance, a study by the American Journal of Managed Care found hospitals in markets with merged facilities charged more for procedures than markets where there were competing health care centers. They discovered that care was comparable.

The cost of care is a mystery to many individuals. According to Kaiser Health News, many individuals don’t evaluate the cost of treatments or how they compare to others. For example, an individual will research a car purchase but not their endoscopy procedure.

Often patients settle for expensive procedures that aren’t necessary. And even when it’s shown that a treatment isn’t effective, it can take a while to change both the patient’s and doctor’s minds.

These results are surprise bills and medical debt for Americans. Moreover, this debt is above and beyond what an individual’s insurance policy pays.

This leads to another reason for high health care costs: malpractice fears. “Defensive medicine” has been around as long as attorneys have prowled the courtroom. Doctors fear litigation, so they often order tests that may not be necessary.

According to MedCrave, studies have estimated that “defensive medicine” costs $100 to $180 billion yearly. Some of that is paid by insurance while the individual incurs other costs.

Health Care Costs in 2023

It’s a mixed bag depending on if you’re on Medicare or have a private medical plan. Some Medicare recipients will see a decrease in costs. But higher income individuals will have to pay up. Businesses that want to attract and keep qualified employees must also pony up.

The jury is still out on whether health care cost increases will catch up to inflation.

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