Healthcare and Lifesciences
Can UAE afford rising healthcare costs
11 Sep 2025
The strategic question facing every leader in the UAE’s healthcare
sector is no longer about growth, but about sustainability. The system is
flashing a clear warning signal: medical inflation in UAE reached 12.5% in 2024, significantly outpacing
the global average of 9.9%. This structural
pressure is translating directly into higher prices for medical procedures and
soaring health insurance premiums that are testing the limits of the current
economic model. This escalating cost curve presents a direct challenge to the
UAE's national vision. But for leaders with foresight, it also creates the most
significant opportunity to innovate, drive efficiently, and build the future of
regional healthcare.
Exhibit 1: Global average medical inflation rate
by country
Three headwinds driving unsustainable costs
This cost escalation is not arbitrary. It is the result of a convergence
of powerful, systemic forces that are driving up the price and utilization of
care.
- Unrestricted fee-for-service model driving
overtreatment in private care: Most UAE residents, particularly expats, are
covered by private insurance provided by employers, reducing out-of-pocket cost
pressure. This allows providers, who earn more by delivering more services, to
prescribe unnecessary diagnostics (~35% of diagnostics tests are considered avoidable or redundant) and branded medications. With
limited clinical oversight or pricing regulation, these practices are significantly
driving up healthcare costs and insurance claims. Insurers, facing margin
pressure from soaring claims, are forced to pass the cost on via premium hikes
(insurers have raised private medical insurance premiums by ~35% in
recent years), burdening employers and individuals alike.
- Increased adoption of advanced technology: To meet growing domestic demand and maintain its
status as a premium medical tourism hub, the UAE healthcare sector is locked in a cycle of continuous, high-cost
investment in cutting-edge medical technology. These capital costs are
invariably passed on through higher prices for services. In
response, insurers are narrowing provider networks to exclude some high-cost
hospitals and contain claim payouts.
- Import costs & macroeconomic pressures: The UAE healthcare sector depends heavily on
imported pharmaceuticals, devices, and consumables. Global supply-chain
inflation, currency fluctuations, and deregulation of price caps are driving up
provider input costs, ultimately passed through to insurers and patients.
Deteriorating impact of rising costs on
stakeholders
Unchecked, this inflationary pressure threatens the foundations of the
UAE’s healthcare ambitions.
- Government: For the government, runaway costs strain public
finances and risk diverting capital from other critical national
diversification goals. This growing financial commitment risks becoming
unsustainable, especially as healthcare demands continue to escalate
- Private sector squeeze: Margin pressure is intensifying across the
board. Insurers face eroding profitability as claims rise, forcing premium
hikes that burden employers. Providers are caught between their own rising
operational costs and the inevitable pushback on reimbursement rates
- The patient burden: Ultimately, the cost is transferred to the
individual. This is seen in rising insurance co-payments, now reaching up to 30%, which are pushing up out-of-pocket costs. This can make healthcare less
affordable and cause people to defer necessary care
UAE's high-cost environment creates a significant but often overlooked
vulnerability: outbound medical tourism. For planned medical procedures, the
substantial price difference between local providers and those in lower-cost
hubs provides a powerful financial incentive for residents to seek treatment
abroad.
Exhibit 2: Average cost of various medical
procedures per person across countries
The path forward: Three levers
for a sustainable system
Bending the cost curve demands more than intent, it needs focused
execution on what the sector can control. This means executing on three
strategic levels with concrete actions.
Exhibit 3: Strategic levers for sustainability
1. Reduce input costs via joint procurement and
local sourcing: By leveraging joint procurement alliances and increasing local
sourcing, healthcare providers can reduce the per-unit cost of imported
pharmaceuticals and medical devices. This helps protect profit margins from
global price volatility and currency fluctuations, addressing a key driver of rising service costs
and insurance premiums, and enabling better control over overall healthcare
expenditure
- For operators (Hospitals & Diagnostics): Actively form or join Group Purchasing
Organizations (GPOs) to drive down unit costs on consumables and high-volume
devices
- For MedTech & HealthTech companies: Invest in local assembly and packaging to offer
competitively priced products and insulate providers from import volatility
- For investors: Strategic opportunity lies in funding the
platforms that enable this shift. B2B procurement platforms and local MedTech
assembly facilities are prime targets
2. Harness digital & AI to improve efficiency: Providers can lower operational costs by
deploying digital tools to automate administrative tasks like billing and
scheduling, while leveraging AI for faster, more accurate diagnostic
interpretations. This efficiency helps control the overall cost of care,
reducing the financial pressure that leads to higher service prices- For operators: Drive automation across administrative functions
like billing, scheduling, and records management to cut costs. In clinical
workflows, integrate AI tools for diagnostics to enhance accuracy, reduce
errors, and boost throughput
- For MedTech & HealthTech companies: Engineer AI platforms that are proven to reduce
provider costs and integrate seamlessly into clinical workflows in areas like
remote diagnostics
- For investors: Prioritize scalable, ROI-proven digital
solutions that integrate seamlessly with existing hospital systems, such as
AI-powered diagnostics or automation tools
3. Shift care delivery to home: By implementing Remote Patient Monitoring
(RPM), providers can reduce costly hospital readmissions and free up capacity
for higher-revenue procedures, boosting profitability. For patients, this model
directly reduces their financial burden by preventing expensive, avoidable
hospital stays that trigger high out-of-pocket costs and co-payments- For operators: Implement Remote Patient Monitoring (RPM) for
chronic and post-surgical patients to reduce costly readmissions and free up
high-value bed capacity for more profitable procedures
- For MedTech & HealthTech companies: Develop user-friendly, IoT-enabled RPM
platforms, including wearables and dashboards, that make shifting care from the
hospital to the home feasible and scalable
- For investors: Fund RPM companies with strong unit economics
that target high-cost chronic diseases and provide the technological backbone
for new, cost-efficient care models
The UAE has a history of bold, visionary transformation. Building a
sustainable healthcare system is its next great challenge. The question is not
one of capability, but of the strategic will to act. The time for that action
is now.