Low Growth Spending in Health Care to Continue Next Year

At 7.5 percent, health care spending is growing at a historically low rate in the United States, according to the PwC Health Research Institute’s (HRI) annual “Behind the Numbers” report on medical cost trends.

For employers, HRI says the net impact of the 2012 increase could be as low as 5.5 percent after accounting for changes in benefit design by purchasers. For health insurers, the decrease in spending and costs may be an opportunity to recoup expenses from the decreasing margins of previous years.

The slowdown in spending, which has persisted for three years, likely will continue through 2013, despite a stabilizing U.S. economy. The spending decrease, according to HRI, is due to structural changes in health care, including a concentration on cost containment by the industry and patients consuming fewer services to save money. 

“Slower growth in health care costs could be the new normal,” said Michael Thompson, principal, human resource services, PwC. “We’re seeing long-term trends that could keep cost increases in check. As employers shift expenses to their employees, for example, these workers are pursuing lower-cost alternatives.”

According to HRI, four factors will deflate the medical cost trend: market pressure to reduce medical supply and equipment costs; increased popularity of new methods to deliver primary; increased availability of comparative cost information; and accelerated savings from the pharmaceutical patent cliff.

To control medical costs, employers are increasing the employee share of costs and expanding health and wellness programs, according to the PwC 2012 “Health and Well-Being Touchstone Survey,” which included responses from 1,400 employers in 34 industries. Changes in plan designs include increases in in-network deductibles, emergency room co-payments and prescription drug co-payments. 

Other insights from the survey include:

• Most employers (57 percent) are considering an increase to employee contributions for health plans.

• Half are considering increasing cost-sharing through plan design, such as higher deductibles.

• More than half are considering raising employee prescription drug plan costs.

• Average enrollment in high deductible plans coupled with a Health Reimbursement Account increased to 43.2 percent in 2012 from 34.2 percent in 2010.

• Nearly three quarters of employers (72 percent) offer wellness programs, and half of them are considering expanding those programs.

One of two contrary factors expected to inflate the trend is increased consumption of health care by newly hired workers obtaining coverage and pent up demand for elective procedures. Technology advances for specialized, sophisticated and expensive treatments also could push up health care spending.