Historic Slowdown in Healthcare Spending Projected for 2014

Healthcare spending is expected to drop to 6.5 percent in 2014, despite millions of newly insured expected under the ACA in 2014, according to PwC’s Health Research Institute (HRI).

In its annual report, Medical Cost Trend: Behind the Numbers, the slowdown in the healthcare growth rate defies historical post-recession patterns, and signals progress in the quest to bend the cost curve. The slowdown also presents financial challenges for the industry as it attempts to adjust to a rapidly changing environment. According to HRI, while structural changes within the industry are helping to contain costs and deliver care more efficiently, consumers who are paying a greater share of the cost are making spending adjustments, including 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 percent in 2014.

According to HRI, health organizations that have been hurt by new reimbursement patterns and the aftereffects of the recession should prepare for additional financial pressure. Uncertainty about the impact of ACA implementation and what to expect from a largely unknown, newly insured population could result in seemingly contradicting themes: a declining medical cost trend and rising insurance premiums, particularly in the individual market.

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 percent of businesses are considering high-performance networks over the next year. Early data suggests this could mean as much as a 25 percent reduction in costs.

Source: PwC , June 18, 2013

Healthcare Trends & Forecasts in 2013: Performance Expectations for the Healthcare Industry

Healthcare Trends & Forecasts in 2013: Performance Expectations for the Healthcare Industry HIN’s ninth annual industry forecast, provides sector-specific guidance for the next 12 months from three key thought leaders, highlighting the challenges that will continue to consume the healthcare executive in the year ahead.

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