A new report suggests the growth of health care costs will slow in 2014, contrary to fears that full implementation of health care reforms will mean higher costs for firms that insure their workers.
PricewaterhouseCooper”™s Health Research Institute projects the net growth rate in health care spending will be about 4.5 percent in 2014, after accounting for benefit design changes such as higher deductibles.
The historically low growth rate comes as consumers, over the past decade, have made fewer visits to doctors”™ offices, postponed procedures, cut back on medications and reconsidered imaging and elective surgeries, according to PwC”™s 2014 Medical Cost Trend study, which was published in June.
“The people who are saying ”˜our health care costs are going up”™ ”” that is correct. They are increasing, at a faster rate than GDP, and that”™s a cause for concern,” said Ceci Connolly, managing director of the PwC Health Research Institute. “But what we are seeing is that it”™s not nearly as fast or as dramatic as it had been a decade or so ago.”
Connolly said the slowdown is the result of changing behaviors by employers and their employees and a greater emphasis on healthy living and wellness; penalties imposed against hospitals by the federal government for readmissions under the Patient Protection and Affordable Care Act (ACA); and the lingering effects of the recession, which have led people to make more cost-conscious health care decisions.
“Consumers and businesses deserve a lot of the credit for pushing down on health care inflation,” Connolly said. “Over the last several years, we have witnessed a significant shift in attitudes and behaviors when it comes to employers and employees about how they”™re going to make their health care shopping choices.”
Retail and mobile clinics ”” which can deliver care at lower costs than hospitals ”” have seen a sharp increase in foot traffic, Connolly said. Additionally, she said, a provision of the ACA that allows employers to adjust their workers”™ premiums based on participation in wellness or smoking cessation programs has had an impact on health care spending.
What the slowdown in cost increases means for employers is likely to vary based on their size and on what sort of benefit packages they offer their employees, Connolly said. For example, in a firm with just a few dozen employees, if just one or two covered employees require a major procedure that would cause the employer”™s costs to rise dramatically, regardless of the overall slowdown in cost growth.
“Keep in mind that many of the large employers that we talk to, we”™re talking about 5,000 or 10,000 employees,” Connolly said. “Their ability to spread risk is very different than that of even a 300 or 500-person business, let alone a 10 to 20-person business.”
