Report Says Health Care Costs Expected to Accelerate New Year

Photo illustration by Dreamstime.
Photo illustration by Dreamstime.

Health costs will accelerate next year, but changes in how people buy care will help keep them from attaining the speed of several years ago, PricewaterhouseCoopers says in a new report.

The prediction, based on interviews and modeling, splits the difference between hopes that costs will stay tame and fears that they’re off to the races after having been slow since the 2008 financial crisis.

“This is not an immediate return to double-digit growth rates,” says Ben Isgur, a director in PwC’s Health Research Institute. However, he adds, “what we’re seeing for 2015 will be our first uptick in some time.”

A projected 4.8% to 6.8% increase in 2015

If health plans stay unchanged, PwC sees medical costs rising by 6.8 percent in 2015, up from a projected increase of 6.5 percent this year. (PwC defines medical costs as per-capita health expenses for private insurers and large, self-insured employers. This is different from the government’s measure of health spending, which includes outlays for the government programs Medicaid and Medicare.)

But PwC doesn’t expect plans to stay the same. In a separate study, the consulting firm forecasts that employers and insurers will continue to raise deductibles and give members other incentives to mind the price of care. (The deductible is what patients pay before insurance kicks in.)

Those changes should slow growth in the total cost of care to 4.8 percent, PwC says, as greater exposure to price tags prompts workers to undergo fewer treatments and tests. (PwC expects the deceleration from 6.8 percent to 4.8 percent to come solely from changes in consumer behavior, not money employers save by shifting costs to workers.)

Employers increasingly offer plans with deductibles of several thousand dollars, making members responsible for routine medical costs, and often for large portions of hospitalizations and other expensive treatment.

More offering high-deductible plans

Two-thirds of the companies surveyed by PwC offer high-deductible plans. Nearly a fifth of employers offer nothing but a high-deductible plan. Some 44 percent of the rest are considering it, PwC said. Other research shows the same trend.

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“A few years ago an employer would kind of put their toe in the water with the high-deductible health plan,” Isgur said. “They were saying, ‘Hey, it’s one of three you can pick from.’ Now they’re saying, ‘This is the health plan we offer.’”

High-deductible plans are associated with lower short-term spending, research shows. But some studies suggest higher costs prompt patients to delay or skip needed care, which could raise long-term costs.

More health care consumption expected

Other factors restraining medical expenses include better coordination between different parts of the system, and payment changes that penalize caregivers for poor patient outcomes, PwC says.

On the other hand, an improving economy is expected to prompt an increase in health care consumption. That pushes up costs. So does hospital acquisition of physician practices, which allows the hospitals to charge more. Drug manufacturers are introducing expensive specialty drugs, which also puts upward pressure on spending.

This article is from kaiserhealthnews.org and published with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Jay Hancock is a senior correspondent for Kaiser Health News, an editorially-independent program of the Kaiser Family Foundation. He previously reported for the The Baltimore Sun, The Virginian-Pilot of Norfolk, and the Daily Press of Newport News. Contact him at jhancock@lkff.org.

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