Medical Cost Trend Expected to Dip Lower for 2014
by Robert Miller
In spite of recent headlines about skyrocketing insurance premiums, a number of factors are pointing to continued downward pressure on medical costs for 2014. The latest data from the Centers for Medicare and Medicaid Services (CMS) show medical spending inflation has slowed appreciably from 11% in 1990 to 3.9% in 2011, and that annual Medicare spending only increased 1.7% per beneficiary between 2010 and 2012, down from 6% per year during the preceding two decades.
Although this continued spending growth slow down will result in additional financial
challenges for healthcare organizations, this development will be welcome news for employers. Price Waterhouse Cooper's (PwC) Health Research Institute (HRI) recently projected a medical cost trend of 6.5% and a net growth rate of 4.5% for 2014, after accounting for certain adjustments like higher deductibles - among the lowest since the government started measuring national health expenditures in the 1960s.
Even with the uncertainties surrounding the full implementation of Obamacare, the HRI does not expect a direct impact on the medical cost trend, citing a number of factors that are expected to deflate medical costs in 2014. These include:
A slower than expected economic recovery that will continue to suppress demand for healthcare.
Consumers who are taking more responsibility for their healthcare and making more cost conscious choices.
A continued shift in care provision from costly hospitals to more cost effective locations such as retail clinics and mobile health.
Large employers who are contracting with big-name health systems to secure lower costs for complicated procedures.
Growth in high deductible plans among employers.
Government actions such as readmission penalties and potential costs savings from Accountable Care Organizations (ACOs).
Source: PwC Health Research Institute
The HRI cites the growing use of complex, expensive specialty drugs/biologics and healthcare industry consolidation as two risk factors that could drive costs higher.
But, on balance, they are confident that structural and behavioral changes in the industry will mitigate these risks and continue to exert downward pressure on the cost trend.
For more information about the 2014 Medical Cost Trend and the implications for employers, payers, providers and pharmaceutical manufacturers, a free copy of the PwC HRI report can be accessed by clicking HERE.
