WASHINGTON | Thu., May 31, 2012 12:00am EDT (Reuters) — The cost of U.S. health care services is expected to rise 7.5% in 2013, more than three times the projected rates for U.S. inflation and economic growth, according to an industry research report from PricewaterhouseCoopers.
But premiums for large employer-sponsored health plans could increase by only 5.5% as a result of company wellness programs and a growing trend toward plans that impose higher insurance costs on workers, the firm concluded.
The projected growth rate of 7.5% for overall health care costs contrasts with expectations for growth of 2.4% in U.S. gross domestic product and a 2% rise in consumer prices during 2013, according to the latest Reuters economic survey.
Health care costs have long been known to outstrip economic growth and inflation rates, driving up government spending on programs such as Medicare and Medicaid at a time when federal policymakers and lawmakers are wrangling over how to trim the U.S. budget deficit of $1 trillion a year.
But PwC's Health Research Institute, which based its research on input from health plan actuaries, industry leaders, analyst reports and employer surveys, said data for the past three years suggest an extended slowdown in healthcare inflation from earlier decades when annual costs rose by double-digits.
"We're in the early beginnings of a shift toward consumerism in health care. And we think that you'll see more of that in the coming months and years," said Ceci Connolly, the health institute's managing director.
More than half of the 1,400 employers surveyed by the firm are considering increasing their employees' share of health benefit costs and expanding health and wellness programs in 2013, according to the report.
Connolly said health plans with higher deductibles and co-pays for workers tend to dissuade unnecessary purchases and offer lower premium costs for employers, while successful wellness programs can reduce the need for medical services.
The report said prospects for higher growth are also being held back by the consolidation of hospitals and physician practices, insurance industry pressure on hospital expenses, a growing variety of primary care options such as workplace and retail health clinics, price transparency and the increasing use of generic drugs.
Upward pressure on health care costs comes in part from a rebounding economy and the growth of new medical technologies, including robotic surgery and the nuclear medicine imaging technique known as positron emission tomography.
PwC's projection of 7.5% growth is nearly double a 3.9% rise in U.S. health care spending that the federal government says occurred in 2010, the last year for which official figures are available.
(Reporting by David Morgan,; Editing by Jan Paschal)
© 2011 Thomson Reuters. Click for Restrictions.
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8 Comments
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Posted by: william g | June 5, 2012 3:44 PM
Those of you that have some sort of negative comment regarding Wellness, I do understand. However, each of you must have your own definition of Wellness. All those plan design ideas and employee cost sharing is a given. However, if you put in place a strong wellness program using Biometirics and healthcare analytics, you will see positive results leading to cost reductions. Remember, as one of you commented, this process does not iniitally produce an annual reward. It should take up to 3 years for the full impact to be realized.
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Posted by: Mary Jo H | June 5, 2012 2:20 PM
Without getting too political, and I don't want to go there, but the whole model of pricing within the industry is just wrong. We can try to teach our participants about better habits, good nutrition, exercise, mindful eating, and that is all well and good, but the reason we have the problem with do with healthcare costs is the pricing model associated with it. There are services out there that can help compare "apples to apples" in terms of the cost of services, but if the preventative service is free, what is the incentive to go somewhere less expensive? Due to the contractual nature of pricing within the industry and the lobbying efforts of large benefit organizations, who knows if the efforts to reduce healthcare spending overall will ever materialize. It has to be confronted on many levels. Corporations are trying to do their part by changing the mindset and health of the participant, but in the end, that is only going to get you so much. We need the market forces to help control costs through price and quality transparency and competition to truly tackle the onslaught of rising medical costs.
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Posted by: dmsteinman51 | June 5, 2012 1:21 PM
Your hypothesis about reducing increases in healthcare costs through wellness programs and cost-shifting to employees is not borne out by the evidence. Wellness programs can certainly help, but they tend to have delayed, rather than near-term, impacts. And with employees changing jobs as frequently as they do in today's economy, investments in wellness will often create savings for future employers rather than current ones. As to increased employee costs, the US already has the highest individual out-of-pocket healthcare costs in the inductrialized world, yet we also have the highest per capita healthcare costs. So raising co-pays and deductibles has failed to control healthcare spending thusfar, and there is no reason to believe that more cost-shifting will be any more effective than past cost-shifting has been. The only way to really impact costs is to restructure all employee benefits to create both incentives and support for behavioral changes that will motivate employees to manage their own health far more effectively and aggressively than most people even consider.
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Posted by: David S | June 1, 2012 2:40 PM
Linda - I agree with your statement. I think PwC may have over interpreted a wellness program's direct impact on healthcare cost. As a health management consultant I think it speaks to the broader message that benefit plan design and the corporate environment must align with wellness initiatives for it to truly be successful. There is a synergistic relationship between all of these factors that must be recognized.
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Posted by: Linda Riddell | June 1, 2012 11:47 AM
PwC may be giving wellness more credit than it deserves here. The connection is frail at best between wellness programs and lower costs. More likely the credit should go to raising deductibles and lower utilization of services, due to the deductible barrier. People tend to put off medical care when they cannot afford it. Providers nationwide, especially hospitals, are seeing less use of services.
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Posted by: Beck P | May 31, 2012 1:23 PM
Perhaps education about better nutrition, and more activity could continue to fuel efforts to reduce so many of the chronic diseases. Synergy amongst the professionals across the board would be outstanding relative to reducing cholesterol, stress, and increasing the benefits of whole foods such as fruit, fiber, vegetables to improve ones health, lower cholesterol, lower blood pressure and eliminate the need for costly medications. We all need to work together as we have a population of obesity that will set health care costs into orbit if we do not work together. This begins at home. Teach, model and discipline good habits.
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Posted by: Beck P | May 31, 2012 1:23 PM
Perhaps education about better nutrition, and more activity could continue to fuel efforts to reduce so many of the chronic diseases. Synergy amongst the professionals across the board would be outstanding relative to reducing cholesterol, stress, and increasing the benefits of whole foods such as fruit, fiber, vegetables to improve ones health, lower cholesterol, lower blood pressure and eliminate the need for costly medications. We all need to work together as we have a population of obesity that will set health care costs into orbit if we do not work together. This begins at home. Teach, model and discipline good habits.
Report this Comment
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