Why Is Medical Inflation Going Through the Roof?

Hong Kong’s medical inflation rate is set to be 8.3% in 2020 – reaching higher increases than the US for two consecutive years.

If you can’t put a price on your health, the increasing costs of healthcare are causing quite a stir around the world. We at AD MediLink are taking a closer look at why medical inflation is going through the roof especially so because of its direct impact on increased medical insurance costs. If you are exasperated by your insurance premium increase, here are some explanations to better understand what’s going on.

What are the medical inflation rates worldwide and locally?




Medical inflation is an international phenomenon that affects continents differently. According to the “2020 Global Medical Trends Survey Report” by Willis Towers Watson, the world’s estimated medical inflation rate is set to reach 6.8% for the year 2020 against 6.7% for 2019.


For example, the average increase in Asia Pacific will remain the same at 7.1%, while Europe slightly rises from 4.2% to 4.3% and the Middle East rates are predicted to jump from 8.5% to 9.3%. On the contrary, Latin America should have a lower rate than the previous year, going down from 12.2% to 11.7%.


In Hong Kong:


In Hong Kong, medical inflation is projected to rise from 8.2% in 2019 to 8.3% in 2020. While the increase rate remains roughly the same, it is important to note that private healthcare costs are particularly high in the city. Interestingly, Hong Kong is surpassing the United States’ rates which are estimated to decrease from 7.9% to 7.2% between 2019 and 2020.


This is one of the reasons why it is important to choose your health insurance plan carefully. Moreover, medical benefits are an advantage highly valued by employees, and therefore an important element to take into account for employers who want to attract and retain talents and staff.


Why is medical inflation so high?


The Willis Towers Watson report explains that cancers, cardiovascular diseases, and musculoskeletal conditions are the top three conditions by cost and incidence  (83%, 55%, 46% respectively). While these three conditions are set to have the most impact in the next five years, mental and behavioral health problems will become increasingly significant in the future. To learn more about this trend, you can read the 2019 report “The mounting crisis of mental health” by Willis Towers Watson.


High medical inflation rates are also explained by an overconsumption of healthcare as well as new technologies. This overconsumption comes as much from healthcare professionals as from the patients themselves. Unfortunately, each act of care has a cost, and the excess of care contributes to higher pricing.


Likewise, the use of new and more efficient technologies ineluctably leads to an increase in prices. In fact, 70% of insurers say that new technologies are partly responsible for medical inflation rates.


Poor lifestyle habits also lead to higher healthcare prices and drive inflation.


In Hong Kong where life expectancy is rated the highest in the world according to the United Nations Vital Statistics Summary, the ageing population and the increasing number of cancer cases have been driving medical inflation locally.

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What is the impact on insurance premiums?


Medical inflation rates directly impact private health insurance premiums. In fact, premiums tend to increase each year even if your insurance contract remains unchanged and provides the same benefits. While premium increases are partly due to insurers’ good or poor management of their products, inflation rates are often beyond the control of insurers.


In its “2020 Global Medical Trends Survey Report“, Willis Towers Watson has found that co-insurance is the number one cost management method – just behind the limiting or capping of certain benefits. Insurers across all regions have been working with networks of providers as the main cost management method.


There is a global trend to exclude the coverage of preexisting conditions for companies with less than 50 employees and the most common exclusions worldwide remain treatments associated to alcohol and drug use, and HIV/AIDS.


According to Willis Towers Watson, Hong Kong “employers should brace themselves for slightly higher premium increases, with 2020 gross medical inflation projected to reach 8.3%.” There is no doubt that with the current social unrest in the city and uncertain economic outlook, companies will review their medical benefits and consider making substantial changes.


Looking for health insurance with expert advice? Contact AD MediLink now at hello@admedilink.hk or +852 2606 2668 to receive a free quote. Advisors uniquely trained on the Hong Kong healthcare system will be in touch to answer all your enquiries concerning both the public and private sectors.


This article was independently written by AD MediLink and is not sponsored. It is informative only and not intended to be a substitute for professional advice and should never be relied upon for specific advice.