Covid-19 had a profound effect on the cost of medical assistance and health services, and the effects are still being felt today. The pandemic also triggered high inflation globally when restrictions eased and people were able to spend money on travel again – leading to high demand – and the supply chain issues it caused meant there was still a shortage of goods. Then the war in Ukraine led to rises in the cost of food and energy, pushing up inflation further.
According to the World Economic Outlook published by the International Monetary Fund in July 2023, global inflation is set to fall from 8.7 per cent in 2022 to 6.8 per cent in 2023 – but this is still the highest it’s been since the global financial crisis of 2007–08 and well above pre-pandemic levels. This has led to a cost of living crisis across the world and the price of pretty much everything going up. But when it comes to rising assistance costs, the picture is complex and there are a variety of contributing factors.
How Covid-19 increased assistance costs
The high concentration of patients that had to be treated in a relatively short space of time during the pandemic put medical infrastructure worldwide to the test, with services in some countries being pushed beyond their limits.
Although the majority of cases weren’t particularly costly, the added demand increased the overall cost of the medical workforce and infrastructure. Ignacio Marquez, Chief Commercial Officer at assistance company World Medical Management Solutions, which is headquartered in Florida, said: “High demand and high concentration leaves an industry more complex and more expensive to run in general.” The extra hygiene and sterilisation measures put in place during the pandemic have also added to costs.
Trade restrictions and travel bans made providing assistance at the time more challenging. “Our field was one of the worst affected industries,” said Gulerukh Nayeem, Financial Analyst at India-based assistance provider Asian Travel & Medical Services (ATMS). “They were difficult and trying times. Post-pandemic, though, one of the worst things is stubborn inflation.”
An existing trend that has been bolstered by the pandemic is more people taking out private medical insurance in emerging economies, increasing the demand in these countries for private facilities and pushing up costs for the assistance providers using them internationally, according to Marquez. “Public health systems are poor in places like Argentina, Brazil, Chile, India, and South Africa, so a lot of people have started setting aside part of their budget to pay for private medical insurance,” he commented. “Private hospitals have seen an onslaught of patients because the local privately insured population has probably doubled in the last five years, and quadrupled in the last 15. The volume has increased so much that there are fewer beds for international patients. This has pulled up prices worldwide, but especially in emerging markets.”
Post-pandemic, though, one of the worst things is stubborn inflation
Even in the UK, where the National Health Service (NHS) generally provides high-quality public healthcare, there has been a clear trend in more people opting for private services, which may have been driven by long waiting lists.
Figures from the Private Healthcare Information Network (PHIN), which tracks private healthcare market activity in the UK, show that there were 820,000 private hospital admissions in 2022 – the highest annual figure ever recorded. This includes 272,000 admissions where people paid for their treatment themselves, rather than with insurance – also the highest level ever.
As well as the cost of medical staff increasing as a result of the pandemic, staffing costs have increased for other reasons, including inflation. Nayeem said: “Inflation is something that affects people in all walks of life, so inflation has put up the cost of living in our country and we have to pay people more. In India, we also have a scarcity of skilled labour.” This results in more demand for staff, which pushes up costs further.
India isn’t the only country experiencing staff shortages with medical staff choosing to work abroad for better pay and conditions is a problem in many places, as those doctors and nurses then need to be replaced by others from elsewhere.
They may also study outside their home country, but then not stay to work. “Doctors are being trained and educated in marketplaces where they will not necessarily deliver their services,” said Marquez. “In Argentina around 35 per cent of medical, dental and pharmaceutical students are foreigners from other parts of South America. They get degrees and go home, so we’re under-generating the workforce.”
Training is another necessary cost that helps companies optimise their performance and stay competitive, especially as they try to recover in the wake of the pandemic. “There’s a demand for us to use the latest software, so we regularly have to go through training processes with our clients,” said Nayeem. “Cultural differences and language difficulties with them add to training costs.” Not all assistance companies have experienced higher staffing costs, but it could just be a matter of time. Maki Takada, Chief Operating Officer at Emergency Assistance Japan, said: “At present, we have not yet seen a significant increase in unit labour costs compared to before the Covid-19 pandemic, but we expect that the impact will gradually emerge in the future. We haven’t seen an increase in training costs either, but we recognise that it’s necessary to consider the increase in costs for improving staff skills and knowledge to ensure competitiveness in the future.”
Training is another necessary cost that helps companies optimise their performance and stay competitive, especially as they try to recover in the wake of the pandemic
Rising medical costs are set to continue to have a big impact on the cost of assistance. They’re projected to rise to their highest level for nearly 15 years due to high inflation and the increased use of healthcare following the pandemic, according to the 2023 Global Medical Trends Survey Report from WTW published in October 2022, which surveyed 257 health insurers from 55 countries.
While the global rate of inflation rose from 8.2 per cent to 8.8 per cent between 2021 and 2022, the average for 2023 is predicted to reach 10 per cent. There are big differences between regions, though, with Latin America projected to experience the highest increase at 18.9 per cent – Argentina’s figure in particular is predicted to be a staggering 79.7 per cent. Asia-Pacific is projected to experience an increase of 10.2 per cent, while the Middle East and Africa is forecast to see a rise of 11.5 per cent – all higher figures than in 2022. This trend is expected to continue into 2024 and beyond. North America is the only region where the increase is set to drop this year: from 9.4 per cent in 2022 to 6.5 per cent in 2023.
The report outlines the three top drivers of these cost increases: overuse of care, where medical practitioners are recommending more services than necessary; poor health habits, which may have been worsened by more remote working following the pandemic and lockdowns; and the underuse of preventative services. These are all factors that became more significant between 2021 and 2022.
There’s also pent-up demand for medical services post-Covid, because of the less serious ailments that weren’t treated during the pandemic, as well as elective surgeries, such as hip replacements that were postponed, and new medical conditions that developed during the pandemic but are only now being diagnosed as people start seeing their doctors again.
According to Marquez, another issue is a move to more US-style healthcare across the world, which has a defensive approach that seeks to rule out rather than just diagnose conditions, involving more testing and therefore more expense. “This has been going on for a decade or so,” he said. “Health systems are mimicking the US health system in its protocols and pricing structure.”
Marquez added that more and more hospitals are becoming Joint Commission International (JCI) accredited, which often means higher prices. JCI is a US accreditation system for hospitals that standardises healthcare but can also make them more complex, he believes. Marquez thinks that this and more people privately insuring themselves locally are the two main factors that have increased medical assistance costs in recent years.
Prices are relatively high because the air industry hasn’t fully recovered … and is struggling to recruit sufficient staff
As well as increased fuel costs pushing up the price of air transportation – an essential component of assistance services – prices are relatively high because the air industry hasn’t fully recovered since the pandemic and is struggling to recruit sufficient staff, which means the capacity needed to meet demand isn’t there. According to ForwardKeys, which provides insights into global travel trends based on its flight ticket data, air travel was set to reach 80 per cent of pre-pandemic (2019) volumes halfway through 2023.
General inflation, energy price rises and rent increases in some areas have added to operational costs such as running an office – another factor contributing to assistance costs rising across the board.
Although Takada said Emergency Assistance Japan is not yet feeling the pinch when it comes to its operational expenses, the company is taking steps to minimise the effects of rising costs that are likely to be felt going forward: “As the total cost will increase as the amount of work increases in the future, we would like to suppress the increase as much as possible by reviewing the work process, improving efficiency and utilising technology,” he said. The impact of the weaker yen since the beginning of 2023 has also increased the cost of the company’s overseas operations.
On the other hand, as the demand for office space reduced during the pandemic and many companies haven’t returned to working from offices to the same extent as before, often moving to hybrid models of working, the cost of renting office space in many business centres has gone down.
Telemedicine – delivering healthcare remotely over the phone or internet – is another aspect that has brought costs down, especially for outpatients, as it’s easier and cheaper to deliver than face-to-face care. “It existed before but was bolstered by the pandemic as people didn’t want to go to hospital,” Marquez pointed out.
“As much as travel insurance and international private medical insurance (IPMI) patients increasingly appreciate a more personal approach, telemedicine is taking care of a very big chunk of the outpatient volume for travel insurance and IPMI,” he added. “It’s in the vicinity of 25 per cent of outpatient cases, which accounts for 85 per cent of the total medical volume.”
Some of the increases in assistance costs will inevitably be passed on to the end user, but assistance companies are also finding ways to reduce their costs – for example by concentrating their business into fewer providers to negotiate better rates and by asking for prompt payment for high-value cases to reduce the impact of inflation.
Others, such as ATMS, have delayed passing the extra costs on to their clients. “Our board has decided to keep prices unchanged for this financial year,” said Nayeem. “We don’t want our clients to face more burden because of an unprecedented hike in prices.”
Ultimately, though, the whole sector will feel the effects of higher prices.