AI Fuels Health Care Costs as Providers Ramp Up Technology Use

AI adoption in healthcare is accelerating costs rather than reducing them, according to recent estimates by PwC. The consultancy predicts that medical expenses will rise by 9% for employer-sponsored plans and 8.5% for individual coverage next year, with a significant portion of this increase attributed to the implementation of AI-enabled software and scribes designed to enhance documentation accuracy and complexity.

The trend is driven largely by healthcare providers leveraging AI tools to capture more detailed billing information, which insurers are absorbing as part of their costs. This shift reflects a systemic incentive within the industry to maximize revenue rather than focusing on cost reduction or patient outcomes. "Companies will take AI and say, 'How can I use this to further my self-interest?'" notes Paul Markovich, CEO of Blue Shield of California parent company Ascendiun.

While some experts like Venrock partner Bob Kocher acknowledge that AI could streamline administrative tasks and potentially reduce long-term costs, they also warn it may exacerbate the fee-for-service model by driving up both service volume and pricing. "AI makes any system more efficient — and since our health system is already super-efficient at driving fee-for-service units of care and coding, I think it's going to drive up both," Kocher explains.

However, there are signs that the industry may be shifting its focus towards applications of AI that directly benefit patient outcomes. Hossein Estiri, an associate professor at Harvard Medical School, suggests that while initial hype around administrative uses like billing is likely to fade, future developments will prioritize improving health and reducing costs through more precise care.