Healthcare expenses continue to increase in the U.S. and major economies. In 2023, healthcare inflation is forcing more Americans to postpone their medical treatments.
This is not a recent development. Since 2000, medical costs have increased by 4.85% each year. The outlook for 2024 does not look any different. Health insurance premiums are expected to increase by 6% this year.
Rising costs increase financial pressures on both patients and payers. Along with the rise in the elderly population in the U.S, chronic conditions like diabetes and obesity are increasing the risk of expensive medical complications.
On the positive side, AI technology is enabling more American medical professionals to extract key data insights and improve health outcomes. According to Morgan Stanley, the healthcare industry has increased its budget for AI technology from 5.7% in 2022 to 10.5% in 2024.
Rising pharmacy and drug development costs
What’s more challenging is that pharmacy costs in the U.S. are also seeing an upward trend. According to the New York Times, drug prices are significantly higher in the U.S. compared to other developed nations. Pharma companies increased the price of 1,460 drugs in 2022, and of 1,425 drugs in 2023. Over one-third (or 37%) of Americans do not fill a medication prescription due to high drug prices.
What factors are driving the increase in pharmacy costs? Supply chain disruption continues to prevail as more pharmaceutical companies fail to meet the growing demand for drugs. Other factors include rising costs of pharmaceutical R&D and lack of healthy competition.
Medical innovations such as gene therapy and early-stage cancer treatment are now gaining mainstream acceptance among patients. However, such specialized treatments are also adding a cost burden on healthcare and insurance providers. As patients expect better treatments and outcomes, there’s a growing demand for improved healthcare technologies.
Costs of Data Breaches
Over and above the costs of medical treatments and drugs, data breaches continue to plague the healthcare industry. In 2023, healthcare systems based in the U.S. states of Florida, Tennessee, and California reported data breaches impacting over 1 million patients. Overall, around 540 organizations reported data breaches to the U.S.-based HHS Office for Civil Rights in 2023, impacting over 112 million individuals.
The healthcare industry lacks standardized protocols for data security and privacy, which makes healthcare systems vulnerable to hackers. With rising concerns about data security, healthcare organizations and payers are more likely to face penalties and fines for violations or lack of compliance.
Transforming Healthcare through Digital Health
According to the National Institutes of Health (NIH), digital health interventions can significantly improve the safety and effectiveness of modern care, thus reducing overall healthcare costs. A recent World Bank report found that healthcare data and technology can help in preventing or managing chronic diseases and in improving health financing.
The U.S. market for digital health is projected to grow from $88.6 billion (in 2022) to $302.7 billion (in 2030). Here are some factors that are driving the adoption of digital health offerings:
- Convenience
Digital health encompasses a variety of healthcare applications including wearables, electronic health records (EHR), telemedicine, and smartphone apps. From the comfort of their homes, patients can now access high-quality healthcare, while doctors can monitor the health of their patients from remote locations. - Affordability
Digital health solutions are also making healthcare more affordable and accessible to more patients and payers. With innovations like mobile health and EHR, digital health tools help healthcare providers with easier access to the patient’s medical records and treatment methods. According to the FDA, digital health tools can improve access, reduce costs, and facilitate personalized patient care. - Effectiveness
Digital health solutions are also improving patient outcomes, as more providers now have real-time access to patient data and medical records. Telemedicine is enhancing patient care, as a low-income patient can now consult a physician “virtually” without skipping their work. According to the American Medical Association (AMA), the percentage of physicians using digital health increased from 85% in 2016 to 93% in 2022.
How AI Technology Can Improve Healthcare
From responding to patient queries to new drug development, AI technology is transforming healthcare in multiple ways. In the post-pandemic phase, more healthcare companies are leveraging AI solutions in areas like drug development, clinical research, and patient care. In comparison to traditional healthcare, AI-powered healthcare solutions can potentially reduce healthcare costs by $200-$360 billion every year.
Here’s how AI can make healthcare better:
- Cost efficiency
According to McKinsey, AI tools can automate nearly 45% of administrative tasks in the healthcare sector, amounting to annual savings of $150 billion. Similarly, AI tools can also detect fraudulent claims in healthcare, thus saving up to $200 billion in insurance payouts.
The use of AI in supply chains is also reducing the costs of trade operations by 34%. 35% of healthcare providers are improving their demand forecasts using this technology. According to the latest reports, AI adoption in the healthcare sector can save the industry up to $360 billion annually.
An AI-powered healthcare system can also help healthcare providers improve the quality of patient care through accurate diagnosis, thus avoiding hefty medical bills and misdiagnosis costs. According to Forbes, AI solutions can reduce the time taken to screen new drugs by 40-50%, thus reducing the costs of drug research. - Improved quality of treatment
With the growing popularity of wearables and personal devices, healthcare providers now have real-time access to patient data, thus impacting the quality of the delivered treatment. AI for healthcare enables professionals to detect unusual data patterns in patient records, thus helping in detecting infectious diseases.
According to Harvard, AI in medical diagnosis can improve health outcomes by 40% and reduce treatment costs by 50%. Similarly, AI-powered virtual assistants or chatbots can answer common questions about medications and even schedule the patient’s next appointment with the doctor. - Reducing healthcare fraud
According to this 2023 IBM article, healthcare fraud is annually costing the industry $380 billion, thus raising both insurance premiums and medical expenses. AI-powered systems can detect suspicious data patterns in insurance claims. This includes isolating the bills for any expensive procedures – or unnecessary medical tests to utilize the insurance cover .
Conclusion
The cost factor is a growing challenge for healthcare payers and providers in the U.S. healthcare market. At the same time, healthcare data continues to grow exponentially and can be a boon if utilized properly. As part of the digital health solution, AI technology is helping healthcare companies to manage their expenses and deliver improved patient care.
As a Google Cloud partner, Onix is enabling healthcare companies to improve their patient care. Here’s how Onix’s Google Cloud AI solution is transforming the healthcare industry. To know more, download our eBook today!
Reference links:
https://news.gallup.com/poll/468053/record-high-put-off-medical-care-due-cost-2022.aspx
https://money.com/health-insurance-premiums-increase-2024/
https://www.nytimes.com/2024/01/17/health/us-drug-prices.html
https://today.yougov.com/health/articles/45388-americans-have-not-filled-prescription-price-poll
https://www.beckershospitalreview.com/cybersecurity/4-largest-healthcare-data-breaches-of-2023.html
https://healthitsecurity.com/features/this-years-largest-healthcare-data-breaches
https://www.techtarget.com/searchhealthit/definition/digital-health-digital-healthcare
