Healthcare costs increasing at six times the rate of inflation

The increased cost of medical treatment in Ireland is outpacing general inflation at a rate of six to one, with the higher price of advanced healthcare likely to lead to more health insurance hikes, according to new research.

The Mercer Marsh Benefits 2019 Medical Trends Around the World report suggests that underlying medical costs in the Republic rose by 4.2 per cent in 2018 compared with a general inflation rate of just 0.7 per cent.

With costs expected to increase by a further 4.5 per cent this year compared to an inflation rate forecast of 1.2 per cent, the impact on health insurance premiums seems set to lead to more price increases.

Over the course of the summer the three health insurers in Ireland rolled out price increases. The VHI announced hikes of 6 per cent while Laya Healthcare increased the prices on almost 100 of its plans and Irish Life raised its prices by an average of 3.3 per cent.

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With no sign of medical inflation easing, further price increases seem likely for the next two years at least, the report suggests.

Health risk factors

Globally, the top three health risk factors influencing medical costs remain metabolic and cardiovascular risk, dietary risk and emotional/mental risk.

Medical costs are also being driven higher by the increasing cost of drugs and the availability of new diagnostic methodologies and testing procedures, often at considerable expense.

Wastage has also been identified in healthcare systems through the over-prescription of low-value health tests and procedures

The report says that with the cost of health benefit programmes continuing to rise, employers are looking more at how they can contain costs through enhanced healthcare plan designs and employee access to specific healthcare options.

In Ireland, organisations are placing increasing focus on mental wellbeing initiatives and preventative wellness programmes. Among European countries surveyed, mental health and emotional risks were identified as the second-biggest factor influencing the costs of employer-sponsored health schemes.

‘Global trend’

“The global trend is that medical costs are rising at a much more rapid rate than general inflation, and Ireland is no exception,” a spokeswoman for Mercer Marsh Benefits said. “Increasing costs are feeding through into higher health insurance premiums.”

One approach employers in Ireland were taking to contain costs was to place increased focus on mental wellbeing initiatives and preventative wellness programmes, she said.

“By embedding wellness in the organisational culture, with strong support at all levels, companies can improve their employees’ health, reduce absenteeism through sickness, and help to address the issue of rising premiums.”