Slow growth still outpaces inflation
Medical inflation has been lower than expected for the past three years, and redrawn estimates from PwC show a low range of 7% to 7.5% from 2010 through 2013.
However, that that rate of growth remains more than three times higher than the 2.3% rate of inflation in the overall economy over the past 12 months, as measured by the gross domestic product.
Judy says investments in technology, changing demographics, and a reliance on a volume-based payment system are big drivers of healthcare cost growth above the rate of inflation, but that is a trend that may be changing. Healthcare usually increases as the economy recovers, he noted, but the report identified structural changes that may disrupt that pattern.
A fourth straight year of low healthcare cost growth suggests that the gap between healthcare spending and overall inflation may be narrowing to a more sustainable level.
Judy says the hope is that someday medical inflation will be in line with overall inflation. "We are making great strides to move towards that," he says. "We are starting to see some of the value-based reimbursement models get put into place. We are laying the foundations for different care delivery models that are lower costs, including retail clinics and retail medicine. And getting everybody aligned around an outcomes-based reimbursement model will help to bend the cost curve."