PricewaterhouseCoopers study projects low medical inflation for 2014

Medical inflation will remain relatively low in 2014, according to a new report by PricewaterhouseCoopers Health Research Institute (HRI).

 

The study says medical costs will rise 6.5 percent in 2014, but that when other factors are put into the mix, the net increase will be around 4.5 percent.

That’s well below the double-digit range of increase in past years.

Aggressive and creative steps by employers, new venues and models for delivering care and elements of the Affordable Care Act (ACA) are expected to exert continued downward pressure on the health sector, the report concluded.

Individual consumers, bearing more financial responsibility for their medical bills, are questioning and sometimes delaying procedures, imaging, and elective services.

The ACA also play a role in the slowdown in 2014, with hospitals working to hold down expensive readmissions or face the law’s penalties. Employers are being given greater power to influence employee behavior through increased or

For its 2014 projection, the HRI interviewed health plan actuaries, industry executives and health policy experts. HRI also analyzed results from PricewaterhouseCoopers 2013 Touchstone Survey of more than 1,000 employers from 35 industries.

According to the report, four factors will deflate medical costs in 2014:

* Care continues to move outside costly settings such as hospitals to more affordable retail clinics and mobile health. Consumers value the convenience, and costs can be as little as one-third of the bill in a traditional healthcare site.
* Major employers such as Walmart, Boeing and Lowe’s now contract directly with big-name health systems for costly, complicated procedures such as heart surgery and spinal fusion. The employers are making the move to “high performance networks” far away from the home office in the belief that even with travel costs, these networks still deliver overall savings.
* The federal government’s new readmission penalties take direct aim at waste in the health system, estimated to be as high as 30 percent. According to government data, hospital readmissions dropped by nearly 70,000 in 2012, and this trend is expected to accelerate through 2014 as hospitals focus on discharge planning, compliance and the continuum of care.
* Seventeen percent of employers in PwC’s 2013 Touchstone survey today offer a high deductible health plan as the only option for employees. And more than 44 percent are considering offering it as the only option. When consumers pay more for their health care, they often make more cost-conscious choices.

Employer engagement and individual consumers are a powerful and growing force in the health ecosystem, the report concluded.

“Health care cost increases continue to exceed overall growth in wages but the gap is shrinking. While we appear to be making progress in breaking the long term cycle of runaway cost increases, employers can be expected to continue to step up efforts to engage employees more directly in value-based healthcare decision making,” said Mike Thompson, PricewaterhouseCoopers principal.

To view more about the report, click here.

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