Medical cost trends are hovering at rates reminiscent of 15 years ago as the U.S. healthcare system faces powerful inflationary forces with few deflationary counterweights in sight. Health plan actuaries surveyed annually anticipate medical cost trends for 2026 to remain at 8.5 percent for the Group market and 7.5 percent for the Individual market—the same elevated levels as 2025.
Behavioral health spending is climbing dramatically, with claims for inpatient services up nearly 80 percent between January 2023 and December 2024, and outpatient services claims up nearly 40 percent over the same period. One out of three health plan actuaries surveyed named behavioral health services as a top three cost inflator, with expectations for 10 to 20 percent trend for behavioral health next year. Prescription drug spending is also intensifying, having grown by $50 billion (11.4 percent) from $437 billion to $487 billion in 2024, driven by growth in oncology, immunology, cardiovascular, obesity, and diabetes drugs.
Rising costs reflect multiple pressures: hospitals and health systems face heavier operating outlays and are implementing innovative revenue collection methods. Rising inpatient admissions and care severity are boosting provider revenue, with health plans absorbing the costs. Hospital year-end margins averaged 2.1 percent in 2024, compared with 7.0 percent in 2019. Many rural hospitals, dependent on government payers, have warned of facility closures.
Federal health policy changes create additional uncertainty. The Congressional Budget Office projected millions more people will be uninsured by 2034 due to the “One Big, Beautiful Bill,” with reduced Medicaid spending and stricter work requirements expected. While impact of these decisions may extend beyond 2026, stakeholders may take action sooner to prepare for dramatic reductions in federal healthcare spending. Health plans should embed artificial intelligence into care management and pre-payment audits to boost efficiency while controlling costs.
This article is an AI-assisted summary. All facts and figures are drawn from the original report: https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html