The Health Research Institute at audit and consulting firm PriceWaterhouseCoopers has released its annual projection for medical cost trend. (PWC Report) The projections are for the following year, so these reflect estimates for the 2013 calendar year. The top line number is 7.5%, which is before any benefit design changes, and those changes are expected to drop the actual trend to about 5.5%, but it should be noted that this is only the share paid for by the health plan. Over the last four years, actual and estimated, the cost trend has stayed in a relatively narrow range. PWC identifies several factors which are leading to a lower trend and two which may put upward pressure on medical costs. The inflationary factors include increased utilization from consumers returning to pre-recession patterns and continued medical technology advances, which never seem to lead to lower costs.
The factors which may lower trend are reduction in medical supply and equipment costs, as payers give more attention to this category and hospitals and other providers use more competitive purchasing processes; alternative primary care vehicles, such as retail and work place clinics, telemedicine and online visits; greater price transparency as laws, regulations and payer and consumer pressure forces providers to post and describe prices; and continued shift of drug spending to generics from brand-names, although this is offset to some extent by rapidly rising specialty drug prices and use. We never tire of noting that while trend is down from a few years ago, it continues to be much higher than either general inflation or GDP growth, so it continues to consume more and more of consumers’ and governments’ income.