Health spending growth at historic low

By BenefitsPro


By Kathryn Mayer

Health care spending is projected to grow at a historically low 7.5 percent for 2013, according to a report released today from PricewaterhouseCoopers’ Health Research Institute.

It’s the fourth straight year of relatively flat growth compared to inflation. Historically, the medical cost growth has been in the double digits, but since 2009, growth has slowed considerably.

That’s a reflection of the sluggish economy, increased focus on cost containment by the industry, lower use of services by cost-conscious patients and efforts by employers to hold down expenses, the report explains. PricewaterhouseCoopers based its research on input from health plan actuaries, industry leaders, analyst reports and employer surveys.

Though the health care spending often bounces back up as the economy recovers, the report identifies structural changes that may temper that pattern. A fourth year of relatively low growth suggests that the gap between health care spending and overall inflation may be narrowing to a more sustainable level.

“Slower growth in health care costs could be the new normal," says Michael Thompson, a principal at PwC. “We’re seeing long-term trends that could keep cost increases in check. As employers shift expenses to their employees, for example, these workers are pursuing lower-cost alternatives. Even as the economy strengthens, changes in behavior by employers and consumers may help limit medical growth.”

Premium rates for large employer-sponsored health plans could increase by only 5.5 percent next year as a result of the employer trends of increasing the employee share of costs and expanding health and wellness programs.

Of the 1,400 employers surveyed, more than half said they are considering increasing employee contributions, cost-sharing through plan design and raising employee prescription drug plan costs. Nearly three quarters of employers (72 percent) offer wellness programs, and half of those say they are considering expanding those programs next year.

There are four factors HRI expects will "deflate" the medical cost trend in 2013: market pressure to reduce medical supply and equipment costs; increased popularity of new methods to deliver primary care; increased availability of comparative cost information; and accelerated savings from the pharmaceutical patent cliff.

“Market forces are driving demands for better outcomes and reasonable costs,” said Kelly Barnes, US health industries leader, PwC. “The question is: How will the industry respond? We expect to see health organizations create services and partnerships that engage consumers and improve quality. It isn't just dollars spent, but value derived.”

But two factors that will inflate the medical cost trend in 2013 include an uptick in utilization and medical and technological advances.

Originally published on BenefitsPro.com