U.S. health care spending should grow at an historically low rate of 7.5% this year, a pace that could emerge as the standard course for the immediate future, according to the annual “Behind the Numbers” report on medical cost trend, published by the Health Research Institute (HRI) of PricewaterhouseCoopers U.S. (PwC).


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Study finds health care inflation in U.S. at crossroads

June 25th, 2012

NEW YORK – U.S. health care spending should grow at an historically low rate of 7.5% this year, a pace that could emerge as the standard course for the immediate future, according to the annual “Behind the Numbers” report on medical cost trend, published by the Health Research Institute (HRI) of PricewaterhouseCoopers U.S. (PwC).

The projection continues a pattern of slower medical growth, a reflection of the sluggish economy, increased focus on cost containment by the health care industry, lower use of services by cost-conscious patients and efforts by employers to hold down expenses. The report suggests that although employers and insurers will seek to capitalize on the cost slowdown, pharmaceutical companies will need to retool their business models if they are to succeed in the new economic environment.

“The United States finds itself at a crossroads with respect to medical inflation,” the study ­concludes.

The report notes that medical inflation has been lower than expected for the last three years and that a recalibration of previous estimates shows a low range of 7% to 7.5% from 2010 through 2013. Historically, says the study, health care spending bounces back as the economy recovers.

Yet, the HRI 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.

Medical cost trend helps insurers and large employers set premium rates for the following year. For U.S. employers, the net impact of next year’s increase could be as low as 5.5% after accounting for changes in benefits design by purchasers, HRI estimates.

Employers are focused on two primary strategies for controlling medical costs in 2013: increasing the employee share of costs and expanding health and wellness programs, according to a separate PwC 2012 survey of 1,400 employers in 34 industries. That poll also showed that plan design features with the most significant changes in 2012 were a considerable increase in in-network deductibles, emergency room co-payments and prescription drug co-payments.

HRI notes that nearly six in 10 employers (57%) are considering increasing employee contributions to health plans. Half of employers are considering increasing cost-sharing through plan design (such as higher deductibles), and more than half of employers are considering raising employee prescription drug plan costs.

The average enrollment in high-deductible plans that are coupled with a Health Reimbursement Account increased to 43.2% in 2012 from 34.2% in 2010.

Nearly three quarters of employers (72%) offer wellness programs; half of those say they are considering expanding those programs next year.

HRI explores what it characterizes as “the leading crosscurrents” likely to shape medical cost trend next year.

One of two factors that are expected to “inflate” the trend in 2013 is an uptick in the consumption of health care as newly hired workers obtain coverage and as patients who postponed elective procedures feel more confident about spending. Medical and technological advances that provide more specialized, sophisticated and expensive treatment also are expected to push up overall spending.

Four factors that HRI expects will “deflate” the medical cost trend in 2013 are market pressure to reduce medical supply and equipment costs, the increased popularity of new methods for delivering primary care, the expanded availability of comparative cost information, and accelerated savings from the pharmaceutical patent cliff.

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