Skip to main content

'Historically' Low Healthcare Spending Growth Predicted for 2013

 |  By John Commins  
   June 01, 2012

Healthcare spending is forecasted to grow at a historically low rate of 7.5% in 2013, PricewaterhouseCoopers LLC estimates.

PwC's Health Research Institute in a survey and report released Thursday attributes much of the projected slower growth to the tepid economy, the healthcare industry's broad focus on cost containment, higher out-of-pocket costs and, therefore, lower utilization for healthcare consumers, and efforts by employers to keep their health insurance expenses down.

"Cost is at the top of the agenda for everyone in healthcare and you are starting to see the industry move towards reconfiguring itself towards getting costs in check," PwC Principal, Rick Judy, told HealthLeaders Media.

"There is price transparency that is really exerting pressure on providers and allowing patients to shop for their medical care based on value and quality," he says. "Some of the drug patents coming off are moving a lot more patients to generics."

"Another deflator is that medical supply costs are down and that is due to a lot of hospital consolidation and physician alignment," he says. "That is improving the negotiating positions for a lot of providers and there is less tolerance for individual physician preference than there used to be."

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."

However, PwC also noted factors that could "inflate" healthcare spending growth in 2013. First, as more jobs are added in the economy, those newly hired workers will likely tap into their new healthcare benefits. Second, many patients who've postponed elective surgery over the past few years may feel more confident about spending in 2013 as the economy slowly recovers.

"We have seen lab and elective procedures increasing after a drop off in past years. Some of our studies cite 46% of consumers we surveyed who had delayed care one or more times because of cost," Judy says.

Employers focus on wellness, cost sharing
Employers have embraced a two-pronged approach to reducing healthcare cost growth that relies on an increasing use of workplace wellness programs and foisting more costs onto employees.

"We are seeing huge growth in the high-deductible plans and cost sharing is one of the things that employers and insurance companies are increasingly adopting as they look at benefit design," Judy says. "All indications from the surveys we have done are that they are going to continue to increase. That is making patients more in tune with the way they consume healthcare in this country."

The survey found that:

  • 57% of employers are considering increasing employee contributions to health plans.
  • Half of employers are considering increasing cost-sharing through plan design, such as higher deductibles. The average emergency room co-pay is now $125 or more.
  • 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.
  • 72% of employers offer wellness programs, and half say they are considering expanding those programs next year.

Such tactics have allowed PwC to project that employers could see healthcare cost growth as low as 5.5%.

"If the plan designs are done appropriately preventative care and wellness-type procedures are going to be the ones that are aligned with the lower costs to encourage patients to seek out those services," Judy says.

"The more elective procedures are the ones that will have higher costs associated with them so patients need to shop around quality and cost and value for those services rather than just consuming healthcare without understanding what those costs are."

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Tagged Under:


Get the latest on healthcare leadership in your inbox.