PWC Report of Medical Cost Trend

Everyone is anxiously awaiting to see if the downturn in medical spending growth will persist.  PWC’s Health Research Institute gives us one of the first predictions on 2014 medical cost trend, but limited to commercial health insurance.   (PWC Report)    The headline expectation is 6.5% medical cost trend, but the Institute expects benefit design changes, mostly higher deductibles and copays, to limit the employer portion of that growth to a trend of 4.5%.  This compares to 2013 growth of 7.5%.  Obviously if employers are only accounting for about two-thirds of the total growth, consumers will endure a spending growth in excess of 6.5%.  The full implementation of the reform law introduces more uncertainty than usual into the projection.  Factors that are keeping trend low include the movement of care to less expensive settings like retail clinics; direct employer contracting for some high-dollar procedures; diminished hospital readmissions (we doubt this has any impact on private health insurance costs); and, most importantly in our view, the continued shift of cost to consumers, who then are more careful about using the health system.  Two factors leading to spending growth are the rise of specialty drugs and consolidation among providers, which typically leads to price increases.  We note once again that even this “lower” medical cost trend is far in excess of our national economic growth and general inflation.  And there should be significant concern about the ability of consumers who face these heavy cost burdens to make good decisions about what and how much health care they use.  While we believe consumers do need to be economically engaged in their health care, we need to ensure that they have adequate skills and tools to make wise choices.