Forecast 2024: Economic Slump & Rising Health Care Costs
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The U.S. economy expanded rapidly in 2023 due to consumers’ ability to tap into extra savings accumulated during the pandemic, slowing inflation and fuel prices, and a stimulative fiscal policy, according to Julius Bendikas, Mercer’s European head of economics and dynamic asset allocation. However, Bendikas predicts the economy will slow in 2024 as consumer savings deplete, inflation falls less than expected, and fiscal policy becomes less stimulative. Healthcare costs are expected to rise, driven by high prescription drug costs and consolidation of healthcare providers, but Tracy Watts, Mercer national leader for U.S. health policy, suggests employers can manage costs through strategies like programs for specific health conditions and steering workers to high performance networks.
2024 Economic and Healthcare Predictions
The year 2023 proved to be full of surprises, according to a team of consultants at Mercer. Julius Bendikas, Mercer’s European head of economics, discussed the unexpected expansion of the U.S. economy despite recession predictions.
Three key reasons for the surprising economic growth in the third quarter were identified:
- Consumers utilized extra savings from the COVID-19 pandemic period.
- Inflation slowed down and fuel prices dropped compared to the previous year.
- Fiscal policy stimulated the economy.
Bendikas anticipates a natural slowdown in the business cycle, following a period of economic overheating. He pointed out three main factors that may slow down the economy in 2024:
- Consumer savings. The surplus savings accumulated during the pandemic have been largely exhausted, particularly among average consumers.
- Although inflation has decreased, with oil, natural gas, and used car prices lower than the previous year, Bendikas doesn’t expect further reduction in inflation.
- Fiscal policy. He predicts that fiscal policy will turn from being stimulative to a headwind, causing the U.S. economy to confront conditions directly.
Inflation remains a key concern for employers and workers. Bendikas sees signs of the labor market cooling, which could impact wage growth, in 2024.
Health Care Costs in 2024: The Good and Bad News
When it comes to healthcare costs for 2024, Tracy Watts, Mercer’s national leader for U.S. health policy, revealed both positive and negative aspects. On the downside, Mercer doesn’t expect significant relief on overall medical cost trends. Employers with 50 or more workers are likely to see increased health plan costs, driven by high prescription drug costs and health care provider consolidation.
On a positive note, Watts proposed strategies, like managing specific health conditions and guiding employees to high-performance networks, to mitigate these increasing costs.
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