Insurance

Medical Inflations: 6 Key Factors and 2025 Price Projections

Author Bowtie Team

Updated on 2025-05-27

Disclaimer: This article is translated with the assistance of AI.

How expensive is healthcare in Hong Kong? Why do health insurance premiums rise yearly? This blog dives into the medical inflation in Hong Kong and on a global scale. We have also included the 2025 price projections for your reference.

What is Medical Inflation? How to Calculate It?

“Medical Inflation” refers to the rising trend in medical costs. In simple terms, it means that the cost of seeing a doctor is getting more expensive, including charges for outpatient services, medications, hospitalization, surgeries, and rehabilitation treatments.

For example, the same surgery at a private hospital in Hong Kong might cost HK$100,000 today, but with the application of new drugs, equipment, and technologies, you might need HK$500,000 to cover the full surgery fee in 10 years.

So, how is medical inflation calculated?

Generally, scholars first select a basket of medical procedures and medications, assign appropriate weights based on various factors, and then calculate the price changes for each item using benchmarks like the Consumer Price Index (CPI) and Producer Price Index (PPI). Finally, they derive the annual medical inflation rate through a weighted average.

Hong Kong Medical Inflation Overview

Medical inflation is a global trend, and Hong Kong is no exception.

As early as 2008, the Food and Health Bureau stated that Hong Kong’s medical expenditure would grow rapidly, estimating that total healthcare spending would increase by 3.6 times between 2004 and 2033, with growth far exceeding economic expansion.

	2004	2033	Changes	Annual Growth Rate
Total Economic Growth (billion)	HK$12,870	HK$34,130	+165%	+3.4%
Total Medical Expenditure (billion)	HK$678	HK$3,152	+365% ⚠️	+5.4% ⚠️

In fact, over the past 10 years, Hong Kong’s medical inflation has continued to rise, increasing the medical burden on residents. This explains why the government announced in the 2022 Policy Address that the healthcare voucher amount would be raised to HK$2,500, a 10-fold increase from the 2009 cap of HK$250.

In recent years, risk management consultancy firm WTW published the “2025 Global Healthcare Trends Survey Report,” which indicates that Hong Kong’s inflation rate is expected to reach 9.8% in 2025, meaning medical costs will rise by 7.5% after adjusting for general inflation.

* Based on the “Hong Kong Domestic Health Accounts: Total Health Expenditure in Hong Kong from 2004 to 2033”, the Census and Statistics Department’s “Hong Kong Population Projections 2004-2033”, and the GDP growth assumptions provided by the Government Economist for the healthcare financing study.
* ⚠️ represents the highest growth rate.

Global Healthcare Inflation Overview

According to the “2025 Global Healthcare Trends Survey Report”, the predicted global average medical inflation rate for 2024 is 10.4%, with the most severe region being Asia-Pacific and the lowest being North America. Although Hong Kong’s medical inflation rate (9.8%) is lower than the global and Asia-Pacific averages, Hong Kong’s medical costs are inherently high.

Medical Inflation Rate
	2023	2024	2025 (predicted)
Global*	10.7%	10.4%	10.4%
Latin America^	10.8%	10.4%	10.1%
North America	7.8%	8.1%	8.7%
Asia-Pacific	10.9%	11.9%	12.3%⚠️
Europe ^#	11%	10.1%	9.4%
Middle East and Africa	10.9%	10.4%	12.1%

* Excludes Venezuela, Argentina, and Turkey
^ Excludes Venezuela and Argentina
# Excludes Turkey
* ⚠️ represents the highest medical inflation rate

6 Key Factors of Medical Inflation

According to the WTW’s “2025 Global Medical Trends Survey Report”, the following factors will lead to medical inflation:

1. Rising Demand for Mental Health Services

WTW’s survey report found that globally, about one-third of insurance companies expect per capita mental health service costs to increase by more than 15% over the next three years, with approximately 25% of insurance companies in the Asia-Pacific region also anticipating premium increases as a result. Additionally, nearly half of insurance companies noted that claims related to mental and behavioral disorders have continued to be the fastest-growing category worldwide over the past 18 months.

Dr. Fung Hong, Executive Director and CEO of the Chinese University of Hong Kong Medical Centre, pointed out that in Hong Kong, more insurance plans are gradually including mental health in their coverage, but excessive or inappropriate use of services is one of the factors exacerbating medical inflation.

2. Pharmacy Costs Expected to Increase Continuously

According to WTW’s survey report, 21% of insurance companies expect pharmacy costs to increase by 15% or more over the next three years, while 46% anticipate an increase between 5% and 15%. Many in the insurance industry believe that advancements in the pharmaceutical sector will drive up overall healthcare costs.

3. Development of Medical Technology

WTW’s survey report indicates that globally, about two-thirds (69%) of insurance companies believe that the costs associated with new medical technologies can lead to rising healthcare expenses. They argue that to achieve cost efficiency and long-term sustainability in healthcare without compromising patient care quality, the ongoing demand for medical technology development will push up overall costs.

4. Pressure from Public Healthcare Systems Shifting to Private Hospitals

Globally, 57% of insurance companies identify declining quality or insufficient funding in public healthcare systems as a primary cause of rising medical costs. When public systems are overburdened, it leads to increased demand for private healthcare services, further driving up costs.

In Hong Kong, public hospitals have long been operating at full capacity. For example, the occupancy rate of inpatient beds in acute hospitals often exceeds 100% for internal medicine wards; meanwhile, the median waiting time for new specialist outpatient cases can exceed one year.

5. Behaviour of Healthcare Service Providers and Personnel

72% of insurance companies indicate that healthcare providers recommending excessive services to patients, leading to overuse or misuse of medical services, also drives up costs.

6. Rising Popularity of Telemedicine and Other Virtual Care Services

WTW’s survey report points out that the biggest change in global health insurance product portfolios in 2024 is the addition of telemedicine and health services, with nearly half of insurance companies implementing these changes. As insurance companies continue to add telemedicine services and features to their product portfolios, it expands healthcare coverage on one hand but also increases costs, thereby contributing to medical inflation.

How Surgery Fees Reflect Medical Inflation

New to the concept of medical inflation? Let Bowtie explain with the Insurance Industry Association’s ‘Medical Claims Data Survey’. We have compiled the cost changes for 5 common surgical procedures from 2012 to 2022, including sigmoidoscopy, thyroidectomy, cataract surgery, mastectomy, and prostatectomy. Among these, the price increase for mastectomy has more than doubled over 10 years, which is significant:

Surgical Procedure	2012 (Standard Room)	2022 (Standard Room)	Increase	Annual Average Increase
Sigmoidoscopy	HK$7,000	HK$9,000	28.57%	2.857%
Thyroidectomy	HK$28,000	HK$47,000	67.85%	6.785%
Cataract Surgery	HK$16,800	HK$25,350	50.89%	5.089%
Mastectomy	HK$15,000	HK$35,180	134.5%	13.45%
Prostatectomy	HK$8,000	HK$15,000	87.5%	8.75%

Bowtie’s team also referenced historical fees published by Hong Kong Adventist Hospital to illustrate the cost increases for some common surgeries:

Surgical Procedure	2018 Surgery Fee (Median)	2024 Surgery Fee (Median)	Increase	Annual Average Increase
Circumcision*	HK$26,807	HK$28,898	7.8%	1.3%
Cataract Surgery	HK$24,888	HK$32,150	29.17%	4.86%
Laparoscopic Cholecystectomy	HK$72,810	HK$91,870	26.17%	4.36%
Breast Lump Excision	HK$60,700	HK$82,996	36.73%	6.12%

*Circumcision is a day surgery fee
* Actual fees may vary depending on the patient’s condition, case complexity, and individual doctor fees

Compare Premium Increases for 9 Medical Insurance Companies

The best way to combat medical inflation is to purchase medical insurance , allowing the insurance company to cover your medical expenses. However, due to the escalating severity of medical inflation, most insurance companies have no choice but to pass on the “costs” to consumers through premium increases.

Hong Kong insurance information platform 10Life reported that in 2022, some insurance companies saw annual premium increases as high as 26.4% . Among the 23 medical insurance plans, over 70% of the products had a minimum increase of 6% or more.

In the same year, a total of 7 voluntary medical insurance plans in Hong Kong experienced premium increases, with the highest rise reaching 11%.

For example, in 2023, if a 35-year-old non-smoking man’s premium is HK$500, it would rise to HK$555 the following year for the same age group, and so on. By 10 years later, the premium for a 35-year-old non-smoking man would reach as high as HK$1,420.

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^{*Full coverage shall mean no itemized benefit sub-limits, and applies to designated benefit items only. The benefit payable shall be subject to the remaining deductible (if applicable), annual benefit limit, lifetime benefit limit and other limitations such as reasonable and customary charges, a pre-existing condition, “List of Designated Hospitals in Mainland China” and receiving medical treatment in the United States. For detailed terms and conditions, product risks, and exclusions, please refer to the relevant product website and policy.}
^{^For example, with Bowtie Pink (Ward) and the deductible option HK$80,000, the monthly premium for a 30-year-old non-smoker is HK$197. The premium comparison above is based on similar medical insurance plans with the ward level (data source on 27, July 2023), HK$50,000 to HK$80,000 deductibles, for a 30-year-old non-smoker. Different medical insurance plans have different coverage and benefit limits. For details, please refer to the relevant insurance policy and its terms and conditions.}

FAQs About Medical Inflation

1. What is the relationship between medical inflation and premiums?

If the medical inflation rate for a given year is higher, it means clients are claiming higher amounts, which in turn requires the insurance company to pay out more in claims. To avoid the payout exceeding premium income, insurance companies generally adjust premiums annually based on factors like medical costs and the risk level of policyholders.

In other words, medical inflation is one of the most direct factors affecting premium increases or decreases.

2. If I make a claim on my insurance, will the premium definitely increase next year?

Each insurance company considers different factors when adjusting premiums, meaning your claims history might affect the next year’s premium or it might not have any impact at all.

All VHIS plans under Bowtie will not increase premiums for an individual policyholder in the next policy year simply because they have submitted a claim on that medical insurance policy.

Sources

Author

Bowtie Team

The Bowtie Life Insurance Company Limited is an authorized life insurance company and Hong Kong’s very first virtual insurer approved. Through the use of modern technology and medical expertise, Bowtie offers an agent-free, commission-free and more convenient online platform for customers to quote, apply and claim for Voluntary Health Insurance Scheme (VHIS) anytime anywhere. Bowtie is ranked first in the direct channel sales throughout 2021. Stay up to date at www.bowtie.com.hk