PwC Projects Slowdown in Health Spending Growth

In its annual report, “Medical Cost Trend: Behind the Numbers,” PwC says the ongoing slowdown in the health care growth rate defies historical post-recession patterns and is likely to be sustained even as the Affordable Care Act (ACA) adds millions more newly insured Americans to the health system next year. According to HRI, structural changes within the industry are helping to contain costs and deliver care more efficiently.  

Consumers, meanwhile, who are paying a greater share of the cost, are making spending adjustments. Many are delaying care, using fewer services and choosing less expensive options such as retail clinics, urgent care centers and mobile health devices.  

Medical cost trend—or growth rate—reflects changes in the actual cost to treat patients and is influenced primarily by the cost of products and services and the number of services used, or per capita utilization. The trend is a key ingredient in setting insurance premiums. After accounting for likely changes in benefit design, such as higher deductibles, HRI projects a net growth rate of 4.5% in 2014.  

Major employers are beginning to contract directly with big-name health systems to tackle expensive and complex procedures for employees, such as heart surgery and spinal fusion. According to PwC’s Touchstone Survey, 33% of businesses are considering high-performance networks over the next year. Early data suggests this could mean as much as a 25% reduction in costs.  

In the report, PwC’s Health Research Institute (HRI) examines the factors that serve to inflate or deflate the medical cost trend. The eighth annual report also includes findings from PwC’s Touchstone Survey of large employers and provides a growth rate projection for the year ahead.