Healthcare Costs Projected to Surge 9% in 2027, Highest Increase in Nearly Two Decades🤯
Healthcare costs are projected to rise 9% in 2027, the largest increase in nearly two decades, as health plans face growing pressure from AI adoption, specialty drug spending, behavioral health utilization and regulatory changes.
The forecast comes from a PwC medical cost trend report, which says the increase reflects long-term structural changes rather than a short-term spike, creating sustained financial pressure across the healthcare system.
AI is emerging as a major cost driver, with 70% of surveyed health plans ranking provider AI tools among their top three contributors to rising costs. While AI can improve efficiency and reduce administrative burdens, some tools may also increase reimbursement costs.
For example, AI-powered clinical documentation can produce more detailed patient notes, leading to increasingly itemized claims. Health plans are responding by investing in monitoring and validation tools to detect inaccuracies and potential overbilling.
Glenn Hunzinger, PwC’s U.S. health industries leader, said rising costs reflect several powerful trends occurring at once. While innovation, improved documentation and expanded access to care are positive developments, they are also increasing spending as affordability becomes a growing concern.
Drug costs have risen about $50 billion, driven by specialty medications, expanding use of GLP-1 therapies and pricing uncertainty involving pharmacy benefit managers (PBMs).
GLP-1 drugs, initially developed for diabetes treatment and now increasingly used for weight management, have become a particular concern for payers because of their rapid adoption and high long-term cost profile.
Behavioral health utilization has increased 62% since 2018. Unlike other areas of healthcare spending, the increase is not primarily being driven by higher prices. Instead, patients are remaining in treatment for longer periods, resulting in greater overall utilization of services.
Regulatory changes are adding further pressure. Under the No Surprises Act, providers win about 88% of Independent Dispute Resolution cases, often resulting in higher reimbursement rates for health plans and self-funded employers. As a result, many payers are expected to place greater emphasis on contract language, reimbursement negotiations and eligibility reviews to reduce the number of disputes that advance to arbitration.
