What’s Driving Health Insurance Costs for Senior Living
Learn about the factors driving up healthcare costs for employers in the senior living industry in 2024 and beyond.
Healthcare expenses are putting increasing pressure on employers in the senior living industry across the United States. While healthcare costs have been a concern nationwide, they pose unique challenges for employers in this sector. In this blog post, we will explore the factors contributing to the rising healthcare costs and how employers in the senior living industry can navigate these challenges to provide quality care while managing their budgets effectively.
The Main Challenge in 2024: Medical Inflation
In recent years, the cost of healthcare has been on the rise. This trend is expected to continue in 2024 and beyond, with one of the primary drivers being medical inflation. Unlike general inflation, medical inflation follows a different timeline. According to experts, it lags general inflation by 7-13 months and typically exceeds general inflation rates by about 2%. This means that while we may see some relief in general inflation, medical inflation is just beginning to impact employers.
Three Key Drivers of Medical Inflation in 2024
Several factors contribute to the escalating healthcare costs in the senior living industry. Understanding these drivers is crucial for employers in this sector to make informed decisions and plan for the future.
#1. Rising Provider Costs
The cost of providing healthcare services has been steadily increasing, especially for senior living facilities. One significant reason is the surge in labor costs, driven by a shortage of healthcare and clinical workers. To retain staff and meet the demands of patient care, many hospitals are paying higher wages and even relying on temporary staff through agencies.
Additionally, hospitals often undertake real estate and construction projects to expand and improve their services. While these investments are essential for meeting the growing healthcare, they also contribute to the rising underlying costs borne by providers, further fueling medical inflation.
For employers in the senior living industry, it’s essential to anticipate these cost increases and budget accordingly, considering the time it takes to negotiate contracts with insurance carriers and adjust premium rates.
#2. Escalating Drug Prices
The cost of prescription drugs is another significant factor driving medical inflation in 2024. Prescription drugs accounted for a substantial portion of healthcare costs for employers in 2022, with specialty medicines being a major cost driver. Drug manufacturers have been consistently raising prices, especially for specialty drugs used to manage conditions like diabetes or obesity.
In regions with a higher prevalence of certain medical conditions, the impact of rising drug prices is particularly pronounced. Employers in the senior living industry must be prepared for these escalating drug costs and explore strategies to manage and control prescription drug expenses.
#3. Pandemic and Delayed Care
The COVID-19 pandemic has had a profound impact on healthcare utilization and patient behavior. Many people postponed or canceled healthcare appointments and treatments during the pandemic, leading to a backlog of care. As a result, when patients did seek medical attention, their conditions were often more severe, requiring longer hospital stays and increased healthcare expenses. This backlog of care has created financial challenges for healthcare providers and insurers alike.
Employers in the senior living industry should be aware of these trends for their own staff and the potential long-term effects on healthcare costs. Delayed care and increased patient acuity can lead to higher expenses for both medical services and disability claims.
Other Factors Senior Living Operators Should Consider
Apart from the key drivers mentioned above, employers in the senior living industry should also take into account the following factors:
Aging Population: The general population is aging, which demands more frequent medical interventions and healthcare resources. As the baby boomer generation enters their 60s and 70s, the demand for senior care services is increasing, driving up costs for employers in this sector.
Increase in Chronic Diseases: Chronic diseases are prevalent among the elderly, and their management often requires more healthcare services and costs. Employers may see an uptick in healthcare expenses due to the prevalence of conditions like heart disease, cancer, and diabetes.
Growing Mental Health Crisis: The pandemic has exacerbated mental health issues among both seniors and healthcare workers. Employers may need to allocate resources to address mental health challenges and support their employees.
The senior living industry faces escalating healthcare costs in 2024, primarily due to medical inflation. Employers must prepare for higher expenses by budgeting accordingly and exploring preventive wellness programs to improve the overall health of their workforce. Managing these challenges requires a proactive approach to ensure that quality care is maintained while controlling costs in the senior living sector.
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