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Medical Cost Trend Expected to Rise in 2020

By Jack O'Brien  
   June 20, 2019

After two flat years, the medical cost trend is expected to rise in 2020, according to PricewaterhouseCoopers.

Employers are taking on activist roles to more effectively reduce healthcare costs, according to PricewaterhouseCoopers' (PwC) annual medical cost trend study released Thursday morning.

PwC's Health Research Institute (HRI) expects the medical cost trend, the annual percentage hike related to the cost of treating patients, to rise in 2020 after remaining flat in both 2018 and 2019. The medical cost trend is projected to reach 6% for the first time since 2016.

Related: PwC Forecasts Flat Growth for Medical Service Costs in 2017

HRI's study points to prices rather than utilization as the driving force behind the uptick in the medical cost trend. Spending on prescription drugs, chronic diseases, and mental health services are listed as the major inflators for 2020.

Meanwhile, the primary deflators are the expansion of worksite clinics, lower-cost sites of care for employees, and maximization of the health benefits package. 

Ben Isgur, HRI leader at PwC, told HealthLeaders that employers are now taking action to mitigate the rise in the medical cost trend, an approach that health system executives should take notice of.

"Businesses are now faced with a medical costs trend which is continuing to outpace general economic inflation and they've tried everything they can on the utilization side," Isgur said. "Guess where they go next? They have to now look at being employer activists and going after prices in order to create a more efficient health system and get better pricing."

Isgur added that as cost-sharing has increased in recent years with the advent of high-deductible health plans, almost one-third of employees with employer-based health coverage have not been able to make payments on their deductibles. This has created a dissatisfaction that has prompted employers to "take matters into their own hands."

He said some employers are building primary care networks, or implementing worksite clinics, with nearly 40% of employers telling Isgur last year one had been established.

HRI's findings are in line with a Willis Towers Watson (WTW) survey from last month that found nearly half of employers plan on implementing high-performance networks (HPN), centers of excellence, or nearby health centers by 2022. 

Related: Employers Leaning Toward High-Performance Networks, ACOs to Improve Care Access

Another trend from HRI that was noted in the WTW survey is the growing interest among employers to provide ample access to behavioral health services.

While chronic disease management inflates the medical cost trend inflator due to an increasingly obese population, utilization of behaviorial health options has actually risen alongside the growing popularity of mental health services.

Isgur said that the amount of employers who reported offering mental health services in 2018 was 75%, more than double the amount who reported offering those options in 2014.

Whether due to the Mental Health Parity Act or acknowledgment of the importance of offering mental health services, Isgur said there will continue to be greater utilization in 2020 and beyond.

Related: Anthem Expands Behavioral Health Options With Beacon Purchase

Isgur said employers realize that since the main issue relating to medical costs are prices rather than utilization, they are exploring ways to provide employees with high-quality care at a more affordable price, such as through participation in a HPN.

"For so long, provider networks have been, the employer has the largest network possible [because] they want to give their employees the most choices," Isgur said. "But one of the things that happens when [employers] have a broad network is [employers] probably don't have a lot of price negotiation because everyone's in it. And [employers] may not even have a lot of quality negotiation, because everyone's in it. So narrow network is kind of a natural place to explore and I think many employers are going to do that."

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


The medical cost trend is expected to reach 6% next year, which would be the first time reaching that level since 2016. 

Major inflators: spending on prescription drugs, chronic diseases, and mental health services.

Major deflators: expansion of worksite clinics, lower-site cost of care options for employees, and maximization of the health benefits package.

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