Today, we take a brief pause from our usual discussions on health data and Artificial Intelligence to highlight a critical point: only informed and empowered consumers can drive meaningful change in the healthcare industry.
We recently received Altarum’s monthly Health Sector Economic Indicators (HSEI) brief (link below), which provides near-real-time insights that go beyond the traditional annual reports from the Centers for Medicare and Medicaid Services (CMS). Supported by a grant from the Robert Wood Johnson Foundation, Altarum’s report offers comprehensive data on health sector spending, as well as valuable information on prices, employment, and healthcare utilization.
Key Insights from the March 2025 Brief:
According to the brief, national health spending increased by 6.3% in January 2025 compared to the previous year. This growth was largely driven by categories such as prescription drugs, which saw an 8.3% increase—the highest among all categories. On the other hand, spending on nursing home care grew at the slowest rate, increasing by just 5.4%. While this might seem concerning, it is actually a positive sign when compared to the Consumer Price Index (CPI), which is often used as a baseline for inflation.
However, the most alarming trend is the sharp rise in prescription drug prices, marking the highest year-over-year increase since 2017. Additionally, physician service prices for Medicare patients have seen their highest growth rate in three years. This surge likely indicates increased visits, diagnostics, and procedures as physicians struggle with declining reimbursement rates—a trend we’ve consistently highlighted for years. Having worked across various diagnostic, ancillary, and physician practices, I’ve seen firsthand how rising operational costs, staffing shortages, and declining reimbursements (adjusted for inflation) continue to put pressure on healthcare providers. While a temporary increase in reimbursements may occur around 2026, I expect it to be short-lived rather than a significant reversal of the broader trend.
Economic Trends:
On a broader scale, Altarum reports that inflation has moderated. Specifically, the year-over-year growth rate of the Consumer Price Index (CPI) decreased by 0.2%, reaching 2.8%, while the Producer Price Index (PPI) dropped by 0.5%, settling at 3.2%.
The Future of Employer Healthcare Costs:
Looking ahead, significant premium hikes in the commercial insurance market seem inevitable for 2026. Insurance companies are facing increasing Medical Benefit (Loss) Ratios due to rising healthcare utilization, and hospitals are also under pressure from escalating operational costs. Employers, even those with self-funded plans, will find themselves with fewer alternatives, exacerbating financial strain. The report highlights that private insurance prices grew by 3.6%, surpassing Medicaid’s 2.6% growth, while Medicare service prices rose by 1.6%. Notably, revised data indicates that Medicare’s physician service prices increased in January 2025 for the first time since January 2022.
Higher Healthcare Utilization:
Healthcare service utilization—the volume of services, not necessarily their cost—increased by 3.7%, slightly lower than the 4% growth rate observed in December 2024. Utilization of physician and clinical services alone rose by 5.4% year-over-year, reinforcing that providers are performing more procedures to compensate for lower reimbursement rates.
Healthcare Employment Growth:
Healthcare employment growth remains strong. As reported by CNBC, the healthcare sector added 52,000 jobs in February 2025, while non-healthcare sectors added 99,000 jobs. Health sector wages grew by 4.3% year-over-year in January 2025, with specific growth rates of 4.6% in hospitals, 4.5% in ambulatory healthcare services, and 3.7% in nursing and residential care facilities.
These dynamics help explain why healthcare consumers are increasingly concerned and frustrated with rising costs and complexity. As seen in the graph below, nearly everyone not on Medicaid has experienced personal cost increases that dwarf the already high cost of living, as reported by the Bureau of Economic Analysis and closely monitored by the Federal Reserve’s Open Market Committee.
Empowering the Consumer:
I often find myself either laughing, sometimes in frustration, when I hear proposals for solutions to reduce healthcare costs. After decades of observing and experiencing this, I’m convinced that costs will continue to rise until something fundamental changes. It’s a bit like Isaac Newton’s Immutable Law of Motion: every dollar of the $5.3 trillion in national healthcare spending represents someone’s revenue, and the velocity of that money is staggering.
Let’s consider the employer. They pay an insurance company or Third-Party Administrator (TPA) an administrative fee to handle their claims—essentially a “cost plus” contract. While there are some incentives to reduce costs, that’s not the way the industry was built. In most cases, payors rely on existing contracts and, occasionally, use their own providers or hospitals. Ultimately, payors are paying providers, hospitals, pharmaceutical companies, and medical equipment suppliers, all of whom take a share of the funds. If you look at the chart above, you’ll see that hospitals account for 31% of healthcare spending, but insurance companies are largely absent from the picture. They act as pass-through entities.
The reality is that rising healthcare costs have been shown to reduce employee compensation. You don’t need a degree to understand that every product or service produced in the U.S. has a healthcare cost component. General Motors, for example, pays more for healthcare than it does for steel, and Starbucks pays more for healthcare than for coffee. The most interesting thing about healthcare is that it’s not only the largest component of GDP, but its costs also influence every other economic component.
What Needs to Be Done to Empower the Consumer?
To empower healthcare consumers, the first step is to provide them with access to their own personal health data. Without this foundational step, no meaningful change is possible. The good news is that we can achieve this today, faster, more efficiently, and at a lower cost than ever before.
About HealthScoreAI ™
Healthcare is at a tipping point, and HealthScoreAI is positioning to revolutionize the industry by giving consumers control over their health data and unlocking its immense value. U.S. healthcare annual spending has exceeded $5 trillion with little improvement in outcomes. Despite advances, technology has failed to reduce costs or improve care. Meanwhile, 3,000 exabytes of consumer health data remain trapped in fragmented USA systems of 500 EHRs, leaving consumers and doctors without a complete picture of care.
HealthScoreAI seeks to provide a unique solution, acting as a data surrogate for consumers and offering an unbiased holistic view of their health. Giving Consumers tools to respond to denial of care by insurers, we aim to bridge gaps in healthcare access and outcomes. By monetizing de-identified data, HealthScoreAI seeks to share revenue with consumers, potentially creating a new $100 billion market value opportunity. With near-universal EHR adoption in the USA, and advances in technology, now is the perfect time to capitalize on the data available, practical use of AI and the empowering of consumers, in particular the 13,000 tech savvy baby boomers turning 65 every single day and entering the Medicare system for the first time. Our team, with deep healthcare and tech expertise, holds U.S. patents and a proven track record of scaling companies and leading them to IPO.
Noel J. Guillama-Alvarez
https://www.linkedin.com/in/nguillama/
+1-561-904-9477, Ext 355
https://www.britannica.com/science/Newtons-laws-of-motion
https://altarum.org/sites/default/files/HSEI-Spending-Brief_March_2025.pdf
https://www.bls.gov/news.release/empsit.b.htm