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Medical Cost Trend for 2019

By June 14, 2018Commentary

For employer-sponsored health plans it is time to make decisions about 2019.  PriceWaterhouseCooper’s Health Research Institute has released its annual projection of what medical cost trends for these plans will be in 2019.   (PWC Report)   Trend is projected to be 6% gross, or 5.5% after anticipated benefit and plan changes, such as higher copays and use of more restrictive networks.  This rate of increase is consistent with the last five years, which is considered to have been “moderate” after several years of double-digit increases.  Only in the world of medical spending would growth well above GDP and inflation be considered moderate.  These increases cause real pain to both employers and workers.  PWC identifies three factors tending to push medical spending for employer plans up.  One is attempts to increase consumer convenience by covering care at retail clinics and urgent care centers and through telemedicine, which may push utilization up.  I personally doubt this has much impact, because even if there is higher utilization, the unit cost is generally much lower.  The second and third relate to the same phenomenon, increased market power for both providers and health plans through large mergers and through acquisition of of physician practices by hospitals or health plans.  Everyone is beginning to finally realize that this consolidation has done nothing for care quality and resulted in ongoing substantial price increases for commercial payers.  The report similarly identifies three factors which may help ameliorate medical cost growth.  These include having a less severe flu season in 2019, the spread of care advocacy services which help guide employees to lower cost providers and more appropriate utilization and greater use of more limited “high-performance” networks.  But the report clearly recognizes that to make real improvement on future years’ cost trends, price must be addressed.

I don’t know when consumers will really feel like they can’t take this anymore and when policymakers will actually do something to address higher spending.  Absent fairly dramatic action there is no reason to imagine that spending won’t actually accelerate as another round of very expensive therapeutics hits the market and large dominant hospital systems keep raising prices.  I strongly prefer market solutions, but when we do things that screw-up the market, like allowing excessive consolidation and granting monopolies to therapeutics irrespective of pricing behavior, we are getting what we deserve.  Those have to be reversed if we are going to see lower spending.

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