Global markets are increasingly susceptible to the impacts of inflation and increased energy prices, with the healthcare industry being no exception. After two strenuous years of battling the effects of COVID-19, and still grappling with the aftermath of the pandemic, the healthcare industry is now faced with a new set of challenges.
The most pressing concern for the healthcare industry as a result of global inflation is the immediate impact on the healthcare sector, patients, and caregivers’ personal lives. Increased demand for healthcare services coupled with drug and workforce shortages, and national healthcare budget cuts puts pressure on the industry to do more with less.
Medical Inflation Differences compared to the rest of the world
Medical inflation is defined as the increase in the average cost and unit cost of healthcare services over time. This phenomenon is seen globally, but its effects can vary from country to country.
Various factors contribute to medical inflation, such as high demand for healthcare services, rising costs of raw materials or labour, supply or labour shortages, advancements in technology, and changes in consumer behaviours.
Historically, medical care pricing has generally grown faster than overall consumer prices. As a result, the cost of healthcare services has been increasing at a higher rate compared to the prices of other goods and services we consume.
For instance, over the last two decades (2000 - 2022), the cost of medical care rose by 110.1%, whilst the cost of all other goods and services only rose by 71.3% within the same time period. Looking back to October of last year (2022), goods and services prices increased by 7.7% overall, whereas the cost of medical care only went up by 5%.
It is unusual, but general inflation has exceeded medical inflation, which may result in higher costs for medical care and insurance in the future. While the projection for global inflation in 2023 is expected to decrease to 6.5%, the forecast for medical inflation is on the rise.
The 2023 Global Medical Trends Survey Report, conducted by WTW, projected medical expense costs worldwide to increase by 10% this year, an increase from 8.8% in 2022 and 8.2% in 2021. Apart from widespread inflation and increasing demand for healthcare services, our recent survey reveals other factors for rising medical inflation including:
The Impact of Inflation on Healthcare Professionals’ Workplaces and Personal Lives
A recent M3 survey of more than 8,400 healthcare professionals working in hospitals and private practices across 14 countries in Europe and the US highlights the biggest challenges the healthcare industry is facing due to global inflation. The survey reveals that 84% of healthcare professionals feel that inflation is affecting the healthcare sector in their country. The main factors impacting the healthcare industry are workforce shortages and increasing prices of medications and clinical equipment.
Inflation is not only affecting healthcare professionals' workplaces but also their personal lives. Most notably, staffing budget cuts have resulted in an increased workload for caregivers which has caused an uptick in stress, putting a strain on their mental health and increasing burnout, which in turns leads to high staff turnover. The survey highlights that healthcare providers have also seen a decline in disposable income as a result of increased housing and grocery costs.
Healthcare providers are adapting their approaches to the best of their abilities in order to lessen the burden of inflation on patient care. However, the impact of inflation on patient care is of great concern, as it can lead to longer waiting times, reduced access to treatment, and decreased availability of hospital beds. The potential consequences of longer wait times and limited access to hospital beds are concerning, particularly for patients who require urgent medical care or admission. As a result of reduced access to treatment, patients may delay seeking treatment which could lead to more expensive care, and exacerbated conditions in the future.
The challenges posed by inflation on the healthcare industry are clear, and it is vital that healthcare professionals receive the support they need to navigate these challenges. Unfortunately, more than half of respondents (56%) do not feel supported by their workplaces to handle the impact, while only 31% felt somewhat supported. While healthcare professionals are taking steps to protect themselves, many believe the national healthcare authorities should provide financial aid, wage adjustments, and financial packages to support them in the face of inflation. Some respondents even note that psychological support for professionals in the field could help mitigate the impact of inflation on their mental health and well-being.
The M3 survey revealed five key measures that healthcare professionals are taking to protect themselves from the impact of inflation including:
- Re-mortgaging their property
There is no doubt that the healthcare industry is experiencing the impact of global inflation, with medical inflation being a major concern. Rising costs of healthcare services, shortages of drugs and workforce, and budget cuts are some of the challenges faced by healthcare providers. The M3 survey highlights the impact of inflation on healthcare professionals' personal lives, resulting in an increased workload, stress, and decreased disposable income. The consequences of inflation on patient care are also concerning, with potential longer waiting times, reduced access to treatment, and decreased availability of hospital beds. It is crucial that healthcare professionals receive the necessary support to navigate these challenges, including financial aid, wage adjustments, and psychological support. The industry must adapt to lessen the burden of inflation on patient care, and policymakers should consider addressing the factors contributing to medical inflation to ensure affordable and accessible healthcare services for all.
Check our our infographic on Global Inflation and the Impact on Healthcare.