This article is part of the Designing for 2035 report.

Several forces will reshape the economy overall and healthcare specifically by 2035, many of which are taking root today. Below are eight critical shifts that are poised to define that reality. From the societal impacts of an increasingly aging population to the continued integration of cutting-edge technologies, these trends will impact the way we approach healthcare.

The effect of a growing aging population on healthcare

Today: The senior population is exploding. Between 2010 and 2020, the US saw the largest increase in people 65 years or older since the 1880s. Seniors now account for one in six Americans (17%), up from one in eight Americans (13%) in 2010. There are widespread impacts on society: decreasing productivity — a 10% rise in the share of the 60-plus population decreases growth in GDP per capita by 5.5%, increased healthcare costs, and shifting workforce and caregiver dynamics to account for this grey wave.

2035: Seniors will make up about one in every four Americans (26%). This will increase demand on healthcare services: nearly 95% of older adults have one chronic condition, and 80% have two or more. Since Medicare bed utilization is over four times higher than commercial bed utilization, we expect an increase in overall bed days, further straining government budgets. Everyone in the workforce will begin to act as a caregiver with many sandwiched between parents and child.

Healthcare’s response to US workforce shifts

Today: The US workforce is shrinking relative to the population as a whole. The ratio of working-to-senior population has decreased from four to one in 2015 to three to one today. Healthcare is not immune, with existing demand shortages of 4.9% for primary care providers, 2.8% for specialists, and 1.9% for nurses. Further exacerbating these trends is burnout and the rising age of the workforce: 40% of active physicians are 55 years of age or older. There are also implications from job hopping. Median job tenure is down 10.9% from 2012 and on consumer turnover within health plans — an estimated two million workers transfer health plans each month.

2035: As the worker-to-senior ratio approaches 2-to-1 in the next decade, these staffing gaps, especially for physicians, will get worse, with projected demand gaps of 10.6% for primary care physicians, 7.5% for specialists, and 5.9% for nurses. Across the board, the workforce will have more leverage and fewer long-term ties to their employers, forcing employers to continue to improve their benefits and employment packages. Beyond enhanced benefits, they’ll create more flexible work arrangements and career development opportunities to attract new talent. Additionally, due to increased turnover, employers will need to find return on investment faster, looking for proven solutions when it comes to health plans.

Addressing consumer expectations in healthcare

Today: Consumers value brands that offer quality, convenience, and that can be trusted. In fact, 85% of consumers rated quality as a deal breaker when selecting a brand and 84% said convenience was a top priority; trust was mentioned by 81% of consumers. Healthcare is no different. More than 90% of people say convenience is the most important factor when selecting their primary care physician. Additionally, consumers are increasingly turning to sources outside of mainstream medicine for health information: 16% look for reliable health information on the news, 11% on social media, and 39% on search engines. Consumers also demand more attention from brands to broader society issues, raising the importance of environmental, societal, and governance platforms. Firms that prioritize ESG have enjoyed 3%-8% performance over benchmark values.

2035: Over the next decade, consumers will continue to seek advice in channels they trust, whether that’s an influencer on social media, their favorite news anchor, or a community leader. Healthcare companies need to adapt to ensure that they become one of these trusted voices. They can take a myriad of approaches, including becoming influencers themselves. At the 2023 Oliver Wyman Health Innovation Summit, the TikTok doctor himself, Austin Chiang, MD, detailed the importance of healthcare organizations immersing themselves in social media to counter misinformation. Healthcare companies will also need to demonstrate their impact on climate and social justice initiatives. 60% of consumers base their purchasing behaviors on sustainability and ethical criteria today, a figure that will continue to grow by 10% year-over-year, forcing companies to change business models to keep up.

Technology’s impact on healthcare efficiency

Today: Over the past decade, we have seen targeted deployment of technology across nearly all facets of healthcare. Telehealth and remote monitoring are commonplace. Backoffice administrative functions are being automated. Advanced technologies like robotic surgery are pushing the boundary of what’s possible in the operating room. And there’s been steady progress in data storage and interoperability — albeit with timid success. These areas of improvement were perhaps natural ones to start with, areas that provide a more convenient alternative to patients and clinicians and that don’t require a medical degree.

2035: Technology will be more widespread and the default in these instances. We will see the expansion of consumer-facing technology, interoperability paving the path for new entrants and market growth, and comprehensive health data leveraged to quantify health and guide decision making. With the advancement of artificial intelligence — see the example of ChatGPT outperforming providers in response to patient questions — self-service models will continue growing to replace many lower-acuity interactions that occur in person today. Today, 63% of clinicians feel that virtual primary care will bypass in person primary care by 2027. States like Tennessee and Texas are already pushing for regulation that will aid these movements by removing the burden of state-by-state licensing, a movement that will continue for the next decade. Finally, we expect data to become increasingly actionable and drive everyday behavioral and medical decision-making like avoiding certain foods and exercising at specific times.

The future of drug innovation 

Today: The number of incurable diseases is decreasing and these interventions are taking place more quickly and more affordably. Through innovations like Teplizumab for T1 diabetes or Anti-Aβ monoclonal antibodies for Alzheimer’s Disease, shifting cell and gene therapy towards diseases with more common indications like sickle cell and Parkinson’s, and increasingly tailored therapies based on specific genotypic/phenotypic characteristics, American life has both increased in span and quality.

2035: Overall drug spending in the US will be almost $1.4 trillion. Gene therapy will be widely adopted. Based on today’s pipeline, more than one million Americans will be treated by gene therapy by 2035. This is not without cost — over $80 billion will be spent globally on CGT. New financing models will emerge to make this more tenable, scrutiny of outcomes and value will increase as payers look to finance these expensive therapies. We still will see underinvestment in major therapeutic areas such as infectious disease, but large advancements in this area will bear major fruit over the next decade.

Navigating healthcare’s government funding challenges

Today: Government outlays on healthcare have reached all-time highs, with Medicare spending hitting $744 billion in 2022, up from $466 billion a decade earlier. The federal government is playing a more active role in trying to control costs, through avenues such as the Inflation Reduction Act, various risk adjustment changes in Medicare Advantage, and the range of pilots that the Center for Medicare and Medicaid Innovation has targeted at specific cost drivers. States are also stepping up their efforts, including Maryland’s total cost of care model and Pennsylvania’s rural health program.

2035: The trend of high government spending isn’t going anywhere. Demographics will dictate that more and more lives will be covered by government-funded programs. Medicare outlays are projected to increase to $1.7 trillion in 2033. Existing avenues to make money in government-sponsored programs will be squeezed or eliminated as the government looks to further reduce costs, such as going after programs seen as loopholes, ramping up drug price negotiations, or reducing 340B and provider-based billing. Additionally, states and the federal government will look to expand total cost of care programs modeled after initial successes.

Rising pressures in care delivery 

Today: Hospitals across the country are in survival mode. Traditional hospital economics have been squeezed by external — reimbursement rates, aging population and payer mix — and internal — rising wage costs, operational complexity — factors. This has affected financial performance. The percentage of hospitals with negative operating margins grew from roughly 28% in 2010 to roughly 53% in 2022. Competitors — in the form of new entrants and payers looking to vertically integrate — have been encroaching on traditional profit centers, like UnitedHealthcare offering at-home and virtual care, Amazon’s acquisition of OneMedical, and Cigna’s Evernorth division.

2035: To maintain viability, we expect providers to accelerate their path into risk, driving investment in alternative sites-of-care, including ambulatory surgery centers and hospital at- home. We also expect new asynchronous care models to evolve. These efforts will drive down costs, maintain quality, and ensure payers don’t divert services. Deeper development of population health initiatives, vertical consolidation, and increased implementation of value-based care will bring about a greater orientation toward consumer-centric services.

The evolution of value-based care in healthcare

Today: We have seen accelerated pressure on traditional economics — aided by greater price transparency, slowly-growing convergence on quality definitions, interoperability, and growing importance of preventive care. One way that the industry is responding to fee for service reimbursement pressure is by adopting value-based care — by mandate and by choice. This is hardly a new idea; we’ve been talking about it for 15 years but perhaps disappointingly, only 40% of payments were tied to alternative payment models in 2020 and 23% in upside-only arrangements.

2035: We will see widespread adoption of capitated and downside risk financial models. Value-based care will gradually become integrated with other care models, such as behavioral health. At the same time, payers pushing into care delivery — starting with primary care, increasingly home-care, and targeted specialty practices — will continue as payers look to directly control costs.

The challenges of 2035 will be daunting. The industry will need to look different. With new models, new roles, and new rules. The following chapters of this report will highlight the big changes that the industry will undertake and how new healthcare markets will emerge to meet these challenges.