PwC: Health Care Spending To Increase by 4.5% in 2014
Health care spending is projected to increase by just 4.5% in 2014, fueled primarily by changes in the industry intended to bring down costs, according to a new report from PricewaterhouseCoopers' Health Research Institute, Modern Healthcare's "Vital Signs" reports.
In the annual "Behind the Numbers" report, analysts specifically predicted a medical cost trend of 6.5% next year. However, changes in health insurance requirements will effectively lower that figure by two percentage points, they noted. HRI Managing Director Ceci Connolly attributed some of the slowdown to lingering effects from the 2007 economic recession that are continuing to influence consumer behavior, such as delaying or avoiding medical consultation or elective procedures.
In addition, the HRI report outlined several structural changes that are slowing costs, including:
- The growing number of retail clinics that were used by 24% of consumers in 2012 -- compared with only 10% in 2007 -- and can deliver care at two-thirds the cost of a doctor's visit;
- The growth of employers' use of high-performance networks -- in which employers contract with marquee health systems to offer high-quality care at savings of 10% to 25%;
- A rapid adoption of high-deductible health plans; and
- Federal readmission penalties.
However, the report also outlined factors that could hamper efforts to curb costs, including:
- FDA's approval of a greater number of specialty drugs than traditional ones between 2010 and 2012, which indicates a growth in biologics manufactured by pharmaceutical companies to treat complex diseases at a high price;
- The potential for industry consolidation which inflates prices by as much as 20%; and
- The potential for accountable care organizations to fail in curbing costs, particularly since few people are enrolled in such networks and start-up costs can exceed savings in the short-term (Kutscher, "Vital Signs," Modern Healthcare, 9/10).