PwC Report Finds That Health Care Costs Will Increase by 6.5% in 2014

Health care costs will increase by 6.5% in 2014, which is lower than previously estimated and an indication that the recent slowdown in medical cost growth might be a trend rather than a temporary reprieve, according to a PricewaterhouseCoopers report published Tuesday, the AP/Sacramento Bee reports.

Report Details

The report outlines four primary factors contributing to the cost slowdown:

• Patients seeking preventive care at retail clinics rather than emergency departments or physician offices;
• Large employers contracting directly with hospital systems that have established best practices for certain medical procedures;
• Federal penalties on hospitals with high readmission rates and other accountability efforts established under the Affordable Care Act; and
• Employers' efforts to shift costs to workers through higher annual deductibles.

Conversely, the report identified two factors that could increase costs:

• High-priced specialty drugs designed to treat chronic illnesses and certain cancers; and
• Potential health care monopolies created as hospitals continue to purchase smaller practices in an effort to consolidate and become more efficient.

The report also predicted that most cost increases incurred under the ACA will be contained to a narrow market segment. For example, certain consumers in the individual market might see premium increases in 2014 implemented in order to offset the cost of older, sicker consumers.

Mike Thompson of PwC's Health Research Institute, which produced the report, said, "There are some underlying changes to the system that are having an impact, and we can expect lower increases as we come out of the recession," adding that cost "is still going up, but not as much as it used to" (Alonso-Zaldivar, AP/Sacramento Bee, 6/18).