APAC medical costs surge prompts employers to optimise spending

Insurers cite technology, public healthcare declines, and overuse of services as key drivers of inflation.

Medical costs in Asia-Pacific are rising faster than anywhere else in the world, with the region expected to experience the highest global medical inflation rate of 12.3% this year, according to WTW’s 2025 Global Medical Trends Survey.

"The rise is rather sharp, but I would say it's also somewhat expected," said Eva Liu, Head of Strategic Development, Health & Benefits at Asia Pacific. "From the 2023 result, we've already seen 73% of APAC insurers expect higher medical trends over the next three years. So overall, we know that this is coming."

According to Liu, the top drivers of medical inflation remain new technology adoption and low or no cost-sharing by members, as insurers continue to flag these factors as major contributors. However, other structural challenges are compounding the issue.

"Forty percent of the insurers also put the decline of quality and funding of the public system as the driver of behavior," Liu said. "It also continues to be concerning, where 80% of the insurers quoted the overuse and misuse of care due to medical practitioners recommending too many services, and also over half of them are worried about the members' poor health habits."

Some markets are experiencing even sharper increases. Liu noted that Indonesia and the Philippines are projected to see medical inflation rates exceeding 18%, much higher than the regional average. "The weakening of local currency further affects the already escalating costs of raw materials, drugs, and medical equipment," she added.

As healthcare expenses soar, employers are being urged to implement cost-containment strategies.

"We would recommend employers to do some quick checks on some minimum actions that can help to optimise the program," Liu said, emphasising that companies should leverage complementary services, improve employee communication, and analyse claims data to identify spending patterns and opportunities for cost optimization.

She noted that while medical inflation is expected to persist, companies can mitigate its impact by tightening policies, preventing benefit misuse, and using case management to improve care for chronic diseases.