What’s driving up healthcare costs?

Each year, as health insurance premiums increase, employers, families, and individuals feel the burden of those rising costs. The increases are being driven by two main factors: 1) people are using more services in certain areas of healthcare, and 2) the care they receive throughout the healthcare system is becoming more complex and more expensive.

An aging population and expanded treatment options are contributing to a greater use of services in a variety of areas, from joint replacements to behavioral health services to treatment for chronic conditions.

Changes in how and when care is delivered are also playing a role. In some cases, challenges with accessing timely primary care can lead to delays in diagnoses and treatment. This can allow conditions to progress, requiring more complex care when they are ultimately addressed.

In recent years, treatments have become more specialized, procedures more advanced, and medications more targeted—and while many of these advancements bring new hope to patients, they come with higher price tags as well.

At the same time, enhanced documentation, particularly in hospital and acute care settings, is leading to claims reflecting a higher (and more costly) intensity of care.

As a result, overall healthcare costs have been increasing 6 to 9% year over year, which ultimately shows up in premiums. 

How this change is impacting our members

Complex care is driving up costs across the country, including here in Rhode Island. At Blue Cross & Blue Shield of Rhode Island (BCBSRI), a relatively small number of high-cost services—particularly hospital care, specialty medications, and surgical procedures—account for a disproportionate share of overall cost increases.¹

For example, the cost of a hospital stay increased by about 7%, driven in part by a growing share of very high-cost, complex cases, even as overall inpatient volume remained relatively unchanged.

At the same time, several areas are seeing rapid growth in use and spending, reflecting increased demand for care. Some of the fastest-growing areas include:

• Behavioral health office visits, up more than 11%
• Diabetes and weight-related therapies, including GLP-1s, with spending up more than 10%
• Outpatient surgical procedures—such as orthopedic procedures—with spending up nearly 10%

Taken together, these trends show that healthcare cost growth is being driven less by how often services are used—and more by the increasing complexity, specialization, and price of the care being delivered.

Addressing these rising costs isn’t about reducing access to care—it’s about improving how care is delivered.

How BCBSRI is working to control costs

Here at BCBSRI, we are working diligently to promote a healthcare system where care is better coordinated, more effective, and less complex. When care is more proactive across settings, costs can stabilize—or even decline. At BCBSRI, we’ve seen some encouraging results from this approach, including:

• Reduction in hospital admissions from cancer patients who are receiving additional support through our oncology program offered in collaboration with Daymark Health²
• Decrease in dialysis costs as care shifts to home-based settings
• Stabilization of emergency department use after years of growth, supported by care management and education
• Treatment of complex conditions—such as acute flare-ups of chronic illnesses like heart failure or respiratory conditions—at home instead of in a hospital setting when appropriate, helping to avoid higher-cost care

We also offer programs and resources that help our members improve their health, which can reduce avoidable emergency department visits and hospitalizations. For example:

• Helping members receive the right care earlier, including programs that support condition management, medication adherence, and access to high-quality services in their community
• Supporting better management of chronic conditions—particularly diabetes, congestive heart failure, and chronic obstructive pulmonary disorder—through programs that combine clinical support, coaching, and medication management
• Expanding access to behavioral health in ways that improve outcomes

These efforts are making a measurable difference in our members’ experience of the healthcare system and in the cost of their care.

The path forward

Even if an individual’s healthcare experience hasn’t changed, the system around them has. When care is delivered in the right setting and is more proactively and effectively coordinated across providers, we can improve outcomes and reduce unnecessary costs—not just for individuals, but for the health of our entire community.

That’s where the greatest opportunity lies—not only to slow the growth of premiums, but to build a more sustainable healthcare system that works for all Rhode Islanders.