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PWC’s Medical Cost Trend for 2017

By June 27, 2016Commentary

PriceWaterhouseCooper’s Health Research Institute publishes an annual report on the medical trend employment-based health plans are expecting in the next calendar year.   (PWC Report)  For 2017, the medical trend is expected to run 6.5% over 2016’s costs, before changes to benefit designs, and 5.5% after such changes.  In case you were wondering, the changes largely involve cost-shifting to employees, so their trend likely is 6.5%.  The federal government has tracked private health insurance trend for 56 years and during that time their have been fairly clear cycles in spending growth.  Since around 1990, those cycles have had lower peaks, but overall inflation and GDP growth have also been more muted.  PWC’s decomposition of spending trends into utilization and price ones, reveals that all the spending growth in the last nine years has been due to price increases–utilization has been flat over the period.  Over the last ten years, the share of total spending from the physician category has declined slightly while that from hospital outpatient and drugs has climbed.

Usage of convenience sites has risen, including retail clinics and urgent care centers.  PWC somehow turns this into a cost driver, even though these sites of care are often cheaper than other sites and overall utilization is flat.  Use of convenience care may mean patients who would otherwise skip appropriate care, get it, which could save money in the long run.  PWC also believes that increased access to and use of behavioral health care is driving spending upward.  But better mental health also tends to mean better physical health, so that also could be a long-run positive.  Factors that may be decreasing trend, according to PWC, include use of “high-performance” networks.  According to PWC, over 40% of employers are considering the use of these networks.  A second governor on cost rises is more aggressive actions by PBMs to control drug spending, primarily by various utilization controls.  As with all other recent evidence, this report suggests that in fact health spending is going to eat up more and more of consumers and employers budgets.

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