For 2014, PwC Projects Medical Cost Trend of 6.5%

health careConsultancy PwC expects medical costs to rise at only 6.5% in 2014, which would be down sharply from increases in recent years. It expects the both the economy and federal public policy will help drive these costs down. If PwC is right, one of the primary expense pressures on the middle class will lessen. This is particularly good news, as real wages have not moved higher in a decade.

The report says:

Defying historical patterns - and placing added tension on the health industry - medical inflation in 2014 will dip even lower than in 2013. Aggressive and creative steps by employers, new venues and models for delivering care, and elements of the Affordable Care Act (ACA) are expected to exert continued downward pressure on the health sector.

And as primary triggers:

  • Care continues to move outside costly settings such as hospitals to more affordable retail clinics and mobile health. Consumers value the convenience, and costs can be as little as one-third of the bill in a traditional healthcare site.
  • Major employers such as Walmart, Boeing, and Lowe's now contract directly with big-name health systems for costly, complicated procedures such as heart surgery and spinal fusion. The employers are making the move to "high performance networks" far away from the home office in the belief that even with travel costs, these networks still deliver overall savings.
  • The federal government's new readmission penalties take direct aim at waste in the health system, estimated to be as high as 30%. According to government data, hospital readmissions dropped by nearly 70,000 in 2012, and this trend is expected to accelerate through 2014 as hospitals focus on discharge planning, compliance and the continuum of care.
  • Seventeen percent of employers in PwC's 2013 Touchstone survey today offer a high deductible health plan as the only option for employees. And more than 44% are considering offering it as the only option. When consumers pay more for their healthcare, they often make more cost-conscious choices.

Filed under: 24/7 Wall St. Wire, Healthcare
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