The bad news for employers, federal and state payers, and health plans is that the medical cost trend for the year ahead is at 8.5% for the second year in a row. The new analysis, Medical Cost Trend: Behind The Numbers, identified three key drivers—pharmaceuticals, hospital costs, and behavioral health spending.

The pharmacy cost trend is actually 2.5 points higher than the medical trend, with a $50 billion increase in pharmacy spending in 2024 (up from a $20 billion increase in 2023). The analysis attributes this increase to expanding use of GLP-1s and new drug launches.

Another reason for the trend is increased hospital spending. Hospitals are both increasing rates and increasing the yield on their billing through enhanced revenue cycle management (RCM) practices. For hospitals, the driver is inflation. Wages are rising more…