Healthcare costs are expected to rise 7% next year as providers deal with higher expenses and seek rate increases during contract negotiations with insurers.

The projection by PricewaterhouseCoopers' Health Research Institute tops the consultancy's estimates in 2022 and 2023, which were 5.5% and 6%, respectively.

Looking ahead to 2024, providers’ expense growth and subsequent rate increases, along with pharmaceutical price hikes, will drive healthcare inflation, PwC researchers said.

Providers will pass on higher labor, supply expenses

Drug price hikes may hit double-digits

The median annual price for new drugs increased from $180,000 in 2021 to $222,000 in 2022, researchers noted.

Meanwhile, providers are spending more to manage a rising number of drug shortages as they source alternative treatments and train staff to manage unfamiliar products. Although more biosimilars—less expensive versions of drugs resembling biologics—are coming to market, adoption among physicians and patients has been relatively slow.

Employers will demand lower-cost options from insurers. They will push for health plans with narrow networks that funnel patients to low-cost, high-quality providers, according to the report. Employers will also likely encourage the use of telehealth for counseling and other mental health treatment, potentially limiting cost growth.