AI is Driving Medical Costs Up

Health plans are projecting healthcare costs will rise 9% next year, driven in part by increased adoption of artificial intelligence billing tools by providers, according to a report released by professional services firm, PwC.

The projected increase in yearly medical cost is the highest in nearly two decades, which surveyed and interviewed actuaries at 27 healthcare plans. The analysis identified five major inflators associated with increased costs.

One of the healthcare sector’s most anticipated and hyped technologies, AI, is among the leading reasons for such an increase. In fact, nearly 70% of surveyed plans ranked use of AI documentation by providers as a top three inflator, while about 20% called AI the number one inflationary trend. Wait a minute! Wasn’t AI suppose to reduce costs of healthcare? So if not, why not?

Providers have been adopting AI that can record and draft clinical notes while suggesting codes for billing. More detailed documentation means facilities can record more diagnoses and subsequent medical conditions during visits. More details allow coding for more complex care and thus, higher reimbursements from insurers which increases health care premiums. This can happen even if treatment doesn’t change.

Margins are thin for many hospitals, and increased reimbursements provide motivation for them during federal healthcare spending cuts, especially in taxpayer-funded Medicaid. Adopting AI billing tools can help providers stay afloat. This is why I don’t trust doctors anymore. It’s all about billing for any condition they can to guarantee profits.

Other trends are also pushing increased healthcare spending. The labor and supply issue is still a leftover remnant of the COVID-19 pandemic and its ridiculous vaccine mandate for healthcare employees. Such mandates caused many to quit.

Merging of providers allowed them increased negotiating leverage over payers, thereby adding to the problem - despite claims mergers reduce expenses. Guess what? They don’t, at least not often. It’s a cause noted by 65% of survey respondents.

Another inflationary trend is the Independent Resolution process set up by the No Surprises Act. The law was enacted in 2022 to protect patients from unexpected out-of-network medical bills. Providers are winning the vast majority of the disputes and earning more than they typically would for providing care.

The explosion of expensive GLP-1 medications is also driving health care costs. Once someone starts these treatment, they are likely to be on them for the rest of their lives. Hence, as with all types of insurance, those who aren’t in need of such insurance are paying for those who do.

Trends that slow healthcare spending have pretty much played themselves out. Generic drugs and pushing care towards cheaper facilities have been added into the current analysis. They are unlikely to have any further influence in driving down costs.

It should be noted that AI technology could eventually start to bend the cost curve. For example, administrative work accounts for a large chunk of healthcare spending, so automating some of these tasks could make a dent. AI could lessen burnout and allow in-demand providers to focus on clinical actions. However, that will take time and there’s little assurance it will happen soon.

Source used: NPR

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