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PwC Report Projects Healthcare Spending to Slow Down by 6.5% in 2014

by Jasmine Pennic 06/19/2013 2 Comments

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Healthcare spending will be 6.5% lower than their estimate of 7.5% for 2013, according to a new report from PwC’s Health Research Institute (HRI). The report, Medical Cost Trend: Behind the Numbers 2014 is based on the analysis of medical costs in the large employer market covering more than 150 million Americans. Each year, HRI issues its projection for the following year’s medical cost trend based on activity in the market that serves employer-based insurance.

For this year’s report, HRI interviewed health plan actuaries and officials (whose companies cover a combined 95 million people), industry executives and health policy experts. Economic recovery has played a major role in healthcare spending slowdown in 2014, but this year’s report also identified other contributing factors:

Four factors “deflate” medical cost trend in 2014:

  1. Convenient care is efficient care- Healthcare will continue to move out of hospital and physician offices in 2014.
  2. High performance care networks cost less- Faced with high medical costs, employers are combing the country for doctors and hospitals that can provide high-quality care at a lower price.
  3. Readmissions ratchet down- New readmission penalties take direct aim at waste in the health system, estimated to be as high as 30%.
  4. High deductible goes mainstream –  When consumers pay more for their healthcare, they often make more cost-conscious choices.

Two factors “inflate” medical cost trend in 2014:

  1. Specialty drug costs reverse generic drug savings- Widespread adoption of generic medicines has helped dampen medical inflation, but the rise of expensive complex biologics will nudge spending trends upward.
  2. Industry consolidation can lead to higher costs- Health industry consolidation has increased more than 50% since 2009— activity that is expected to continue through 2014.

Additionally, PwC has released an infographic visualization to highlight the key findings of their recent report.

PwC Report Projects Healthcare Spending to Slow Down by 6.5% in 2014

Click here to download the full report

Image credit: Tax Credits via cc

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