Aon Hewitt on Global Medical Cost Trends.

By January 10, 2017Commentary

The United States is not the only country with a large reliance on employer-sponsored health benefits.  This practice is increasing around the world and many multi-national companies feel pressure to offer benefits across countries.  An Aon Hewitt report looks at expectations for medical cost increases in 2017 for these employer-sponsored health plans.   (Aon Report)   Overall, the firm projects medical trend to be 8.2% in 2017, or over 5% higher than its general inflation projection of 2.8%.  For comparison, in 2016 overall medical trend was estimated to be 8.1% and inflation 2.9%.  Primary factors in medical cost escalation are said to be population aging, the spread of poor lifestyle choices (smoking, bad diets, etc.) around the world and cost-shifting from social programs.  The list of medical conditions driving increased spending globally would look familiar to research focused on US health spending–cardiovascular conditions, high blood pressure, cancer, respiratory problems and mental health.

The service categories giving rise to more spending would also look familiar, mostly hospital and prescription drugs.  And companies everywhere are responding with similar tactics–more cost-sharing, benefit design changes and use of supposedly cost-effective provider networks, along with greater emphasis on wellness.  Cost trends vary by region.  With Latin American and the Middle East & Africa leading the pack at increases of 14.2% and 14.3% respectively.  Europe, with its national health insurance and health systems, is more moderate at 5.7%, but that is still 3 times the rise in general inflation.  North America is next at 6.3% and Asia is in the middle at 8.9% growth.  Individual countries show even more variance, even within a region, but it is clear that employers everywhere are struggling with health care cost issues.  Detailed information regarding claims and expenses is often reported to be lacking in regions outside North America and Europe, making it harder for employers to assess the causes of growth and address them.

Cost-sharing becomes an easy fallback, but does little to remedy underlying health issues.  Wellness programs are the most-used and best current efforts to improve workers health, which should lead to lower costs in the long-run.  While they are becoming more common globally, it appears that companies have difficulty with employee engagement in these efforts everywhere.  A set of firms that Aon Hewitt identifies as “progressive” pushes the hardest to make these programs available and to get employees to use them, and those firms may be experiencing a lower trend rate.  Good news!!  We are not the only country plagued by the health spending growth epidemic.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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