PwC Predicts Historically Low Growth in Healthcare Spending

According to the annual Behind the Numbers report, published by the Health Research Institute (HRI) of PwC US, medical cost trends help insurers and large employers set premium rates for the following year. For U.S. employers, the net impact of next year’s increase could be as low as 5.5%, after accounting for changes in benefit design by purchasers, HRI estimates.    

Employers are focused on two primary strategies to control medical costs in 2013:  increasing the employee share of costs and expanding health and wellness programs, according to the PwC 2012 Health and Well-Being Touchstone Survey of 1,400 employers in 34 industries.  The survey also showed that plan design features with the most significant changes in 2012 were a considerable increase in in-network deductibles, emergency room co-payments and prescription drug co-payments.    

Highlights include: 

• Nearly six in ten employers (57%) are considering increasing employee contributions to health plans; 
• Half of employers are considering increasing cost-sharing through plan design, such as higher deductibles; 
• More than half of employers are considering raising employee prescription drug plan costs; 
• Average enrollment in high-deductible plans coupled with a health reimbursement account has increased to 43.2% in 2012 from 34.2% in 2010; and 
• Nearly three quarters of employers (72%) offer wellness programs, and half of those say they are considering expanding those programs next year. 

Historically, healthcare spending bounces back up as the economy recovers, but the HRI report identifies structural changes that may temper that pattern. A fourth year of relatively low growth suggests that the gap between healthcare spending and overall inflation may be narrowing to a more sustainable level.     

“Slower growth in healthcare costs could be the ‘new normal,’” said Michael Thompson, principal, human resource services, PwC.  “We’re seeing long-term trends that could keep cost increases in check. As employers shift expenses to their employees, for example, these workers are pursuing lower-cost alternatives. Even as the economy strengthens, changes in behavior by employers and consumers may help limit medical growth.”  

In Behind the Numbers, HRI explores the leading cross currents likely to shape medical cost trend next year. One of two factors expected to “inflate” the trend in 2013 is an uptick in the consumption of healthcare as newly hired workers obtain coverage and patients who postponed elective procedures feel more confident about spending.  Medical and technological advances that provide more specialized, sophisticated and expensive treatment also are expected to push up overall healthcare spending.  

Four factors HRI expects will “deflate” the medical cost trend in 2013 are: market pressure to reduce medical supply and equipment costs; increased popularity of new methods to deliver primary; increased availability of comparative cost information; and accelerated savings from the pharmaceutical patent cliff.