Medical inflation is defined as the rate at which healthcare costs have risen due to current trends and developments. This has been remaining high for several years due to increased need for medical care across the world. Medical inflation includes utilization and unit costs which means how often services are used and what are the cost per service. 

The global average medical inflation rate is noted at 10% in 2025, with rates the highest in the Middle East and Africa (15 %), followed by Asia-Pacific (11%) and Latin America and the Caribbean (10%). Medical inflation in GCC is around 12% and particularly in UAE which is 11.5%. 

Causes Of Medical Inflation 
There are several reasons that cause medical inflation and keep it high in recent years. Let’s go through some of the major reasons: 

  • Technological advancements: Modern technologies in medical field cause inflation increase due to high cost for research, development, and implementation of new drugs, devices, and digital solutions, as well as ongoing maintenance expenses. 
  • Chronic diseases: Conditions like diabetes, heart disease, respiratory illnesses, etc.  can increase medical inflation by creating high demand for long-term care, expensive treatments, and pharmaceuticals. They also contribute to higher administrative costs. 
  • Ageing population: The immunity of older population is comparatively lower than others and they are becoming sick quite often Also, chances for having chronic diseases is usually high in aged individuals. 
  • Lifestyle factors: Daily living habits like poor diet, lack of physical activity, habit of drinking, smoking and other drug materials are creating an unhealthier population requiring more medical care.  
  • Increased administrative costs: Increased administrative costs due to complex systems, regulatory compliance, and activities like billing, IT, and finance directly increase the prices for medical care, leading to higher insurance premiums and inflation in the healthcare sector. 
  • Profit-oriented mindset: The eagerness to make more profit may turn medical care into business rather than a social service. This will lead prescription of unwanted medicines and test, monopoly in market etc., to increase the revenue and affects the inflation. 
  • Government laws: The rules and regulation of government that cause high taxation or expenses in importing and implementing innovative technologies and in establishing health care facilities. 
  • War/ Terrorism/ Conflicts: Such events often lead to high healthcare costs due to disrupted medical infrastructure, supply chain interruptions, and increased demand for emergency medical services. 

Consequences Of Medical Inflation 
Let’s walk through the below major consequences of medical inflations: 

  • Higher insurance premiums: Medical inflation increases the overall cost of healthcare services, and which will force the insurers to raise premiums to cover the expenses of treatments and medications.  
  • Reduced benefits: Insurance companies are forced cut benefits to keep the insurance premium affordable to the members and which can lead to them applying stricter claim approvals and restrictions on coverage, higher cost-sharing, etc. 
  • Reduced access to care: Increased healthcare expenses lead individuals to avoid even necessary appointments and prescriptions as these become unaffordable. 
  • Increased expenses for employers & dissatisfaction among employees:  Due to the increase in medical insurance premiums, employers may face budgetary constraints and might be forced to reduce the health coverage benefits offered to employees or to reduce other allowances or benefits, which causes dissatisfaction among the workforces. 

Factors That Can Reduce The Inflation

  • Technological advancements: While technological advancements are often seen as a driver of medical inflation, they also can reduce it. New technologies help in earlier and accurate disease detection, telemedicine, remote monitoring of chronic cases, etc., which can lower overall treatment costs. Innovations can make the production of medical equipment more cost-effective. Also, advancements such as Electronic Health Records (EHRs) and administrative software help automate repetitive tasks and streamline healthcare operations. 
  • Preventative and personalized medicine: Preventive vaccinations and wellness care can reduce the medical needs. Also, personalized medicine, which uses genetic insights to create targeted care plans, can reduce unnecessary procedures and improve success rates. 
  • Government Law: Implementing lower taxes on the import and export of advanced medical equipment, along with providing foundational support for medical technological advancements, can help reduce treatment costs. 
  • Maintaining healthy lifestyle: As individuals, everyone should adopt a healthy lifestyle to maintain good health and minimize the need for medical treatment. 

What is the role of Insurers and Brokers in controlling medical inflation? 
Insurance companies are implementing many measures to help control rising costs for their members.  

  • Negotiating with medical providers: Contracts of insurers with providers help in keeping the costs down for members, as well as direct billing partnerships allows them in finding the right medical care at an appropriate and fair price. 
  • Encouraging preventative care: Many insurance providers include preventive care such as vaccinations and routine health assessments in their plans and which helps reducing the healthcare needs. 
  • Use of technology: Insurance providers can use advanced technologies, such as data analytics and automated claims management, telehealth services to support members by detecting cases of fraud like inflated claims or false information and to reduce high-cost in person hospital visits. 
  • Cover options: By offering various plan options for increased deductibles and excluding certain expensive countries from cover, such as the USA, Canada, etc, insurers are able to reduce the insurance premium. 

As brokers, alongside the efforts of insurers and other stakeholders, we have the responsibility to actively contribute to identifying and implementing effective solutions to reduce medical inflation across the region. 

  • Analysis of claims: We conduct a thorough analysis of the utilization of our clients’ medical policies, and we provide proper suggestions and advice, to control and avoid unnecessary claims, for better policy performance and long-term sustainability. 
  • Suggesting best coverage: With professional experience and in-depth knowledge of the market, we recommend suitable and effective benefit coverage that aligns with efforts to control medical inflation. 
  • Healthcare awareness sessions: We coordinate and encourage insurers to organize healthcare awareness sessions and actively encourage clients to adopt healthier lifestyles and prioritize preventive healthcare measures. 

The expected global medical inflation in 2026 is not less than the prevailing rates seen this year. However, higher inflation rates anticipated in areas affected by conflict or catastrophes, such as Russia, Ukraine, Lebanon, Palestine, Israel, etc.

Despite these challenges, let us look forward to transformative progress in the medical field that fosters accessibility, affordability, and better health outcomes for all.