PwC: Pace of Rising Medical Costs Slowing

Margaret Dick Tocknell, June 18, 2013

Lower-cost healthcare options such as retail clinics and a decline in hospital readmissions are holding the projected increase in medical costs to 6.5%, a full percentage point lower than the 2013 projected rate, says PwC's Medical Cost Trend report.

As work to implement the Patient Protection and Affordable Care Act continues, a new report projects that for the fourth consecutive year, the pace of medical cost increases will slow.

Taking into account the spread of less expensive care options such as retail clinics and a decline in hospital readmissions, in 2014 healthcare cost are projected to increase by 6.5%, according to the Medical Cost Trend report from PwC's Health Research Institute [PDF]. That is a full percentage point lower than the 2013 projected rate.

The medical cost trend, which is a measurement of the inflation in the cost of medical goods and services from year to year, is of importance to employers and consumers because it influences the cost of health insurance premiums, Rick Judy, principal in PwC's Health Industries practice, said in a telephone interview.

While the economy continues to impact the healthcare industry, a number of new factors are identified as influencing the downward direction of healthcare costs in 2014. Some are related to the PPACA while others are structural changes introduced by the private sector:

Declines in hospital readmissions: New readmission penalties introduced by the PPACA take direct aim at waste in the health system, which is estimated to be as high as 30%. According to PWC Medical Cost Trend report, hospitals are already putting more effort and energy into preventing costly readmissions and it shows—hospital readmissions dropped by nearly 70,000 in 2012. That trend is expected to accelerate through 2014.

Margaret Dick Tocknell Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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