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Analysis

Medical Cost Trend Could Hit 10% in 2021

By Jack O'Brien  
   June 24, 2020

One upshot for provider organizations is that it will be crucial to build out virtual mental health care options and integrate them into "broader primary care services."

The medical cost trend could range between 4% to 10% next year, according to PricewaterhouseCoopers' (PwC) annual medical cost trend study released Wednesday morning.

PwC forecasts three scenarios for the medical cost trend in 2021, with a high scenario of growth at a 10% spending rate, a medium scenario of a flat spending rate at 6%, and a low scenario of "dampened" spending at 4%.

The report indicated that the ongoing coronavirus disease 2019 (COVID-19) pandemic has already dramatically impacted employer healthcare spending, which is likely to continue into next year. 

"Employers are incurring unplanned COVID-19 testing and treatment costs in 2020, and those costs likely will continue in 2021," the report stated. "In 2020, these unplanned costs are expected to be more than offset by the savings from delayed care during the pandemic. An increase in spending is expected in 2021 as the demand for care returns."

Related: Medicaid Pharmacy Cost Trend Increases Despite Drop in Utilization

Major factors that are expected to impact healthcare spending next year include behavioral health services, the emergence of telehealth, new specialty drugs, and narrow networks, according to PwC.

Related: National Health Spending Growth Projected at 5.4% Annually through 2028

The upshot for provider organizations is that it will be important to build out virtual mental health care options and integrate them into "broader primary care services," while also coordinating with payers and employers to administer high-priced specialty drugs in the "safest, lowest cost setting."

Additionally, hospitals and health systems must embrace the idea that the rising popularity of telehealth services may be "the new normal," redesigning the patient experience around a "heavily virtual system," as well as pursuing narrow network agreements that "address patients' whole health needs."

Related: Employer Medical Costs Forecast to Rise at More Than Double the Inflation Rate

This year's medical cost trend report deviates from last year's study given the precipitous drop in employer healthcare spending at the start of 2020 and the uncertain nature of spending for the rest of the year.

Last year's study estimated that the medical cost trend would rise slightly in 2020 after remaining flat in 2018 and 2019. PwC attributed this to employers taking on activist roles to reduce healthcare costs more effectively.

Related: Medical Cost Trend Expected to Rise in 202

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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