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Behind The Numbers: Slight Rise In Health Care Spending Growth Projected

June 24th, 2014

PwC’s Health Research Institute (HRI) released its ninth annual Medical Cost Trend: Behind the Numbers report today. This forward-looking report is based on interviews with industry executives, health policy experts, and health plan actuaries whose companies cover a combined 93 million members. Findings from PwC’s Health and Well-being Touchstone Survey of 1,200 employers from 35 industries are also included.

HRI projects that after a five-year contraction in spending growth in the employer-sponsored market, the growth rate will rise to 6.8 percent in 2015, up from the 6.5 percent projected last year.

What are the biggest drivers of the growth in health care costs? We identify four cost inflators in this report, and I would like to highlight two. First, the economy. More than five years after the end of the Great Recession, the improved economy is finally translating into greater medical spending. Consumers are now addressing health issues they ignored or postponed previously.

Secondly, the high cost of specialty drugs. While only four percent of patients use specialty drugs, those medications account for 25 percent of total U.S. drug spending. And estimates are that U.S. specialty drug spending will quadruple by 2020

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Behind The Health Spending Numbers

June 18th, 2013

Millions more Americans are expected to join the ranks of the insured in 2014 under the Affordable Care Act (ACA) — and with the expansion in coverage will come additional expense. Even so, the rate of spending growth in the health sector will head in the opposite direction, continuing a slowdown that has lasted well beyond the 2009 recession.

In its eight annual report on health spending, PwC’s Health Research Institute (HRI) projects that 2014 medical cost trend will be 6.5 percent–a full percentage point lower than our estimate of 7.5 percent for 2013. Taking into account typical adjustments to benefit design such as higher deductibles, HRI projects a net growth rate of just 4.5 percent. That’s encouraging news for the people and companies purchasing care but presents enormous challenges for a sector already feeling a financial squeeze.

The recession and slow economic recovery have clearly affected health care spending. But we have identified other factors. More efficient care delivery combined with creative cost-reduction efforts by employers and the health industry, have acted to dramatically slow what had been double-digit growth for the sector. Early elements of the ACA are beginning to nudge down payments. What we don’t know yet is whether this slowdown represents early signs of the move away from fee-for-service medicine or merely the latest squeeze on the spending balloon in which costs pop up elsewhere.

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Scoring Health Care

May 31st, 2013

Families typically spend more on health care than on any other product. Yet today’s ratings culture with its stars, grades, and scores on everything from hiking boots to mountain villas has yet to establish credible, easy-to-use quality guides for doctors, hospitals or health insurers.

Consumers have never had as much at stake in the health care system and can’t afford to make the wrong choices because they lack the right information. A growing number of people with insurance today are moving into high-deductible plans that put the purchasing pressure on the consumer. Now, with the Affordable Care Act (ACA) about to steer millions of newly-insured Americans into marketplaces known as exchanges, government and industry need to collect and distribute real-time patient feedback that offers viable quality and experience comparisons.

Patients’ yeas or nays already add up in this era of value. The ACA has shifted reimbursement policies toward quality, moving from fee-for-service to outcomes-based payment. Insurers that serve Medicare beneficiaries stand to gain at least $5 billion in bonus payments linked directly to patient feedback. Medicare also rewards hospitals that provide high-quality care through its Hospital Value-Based Purchasing Program. Aside from the financial benefits, providers and insurers have much to learn from seeing how they rank across the competition.

For consumers, however, word of mouth still trumps reviews and ratings. PwC’s Health Research Institute (HRI) surveyed 1,000 consumers in late 2012 and found that nearly half (48 percent) read a multitude of reviews, but only one-third acted on those ratings in health care decisions. At the same time, about half said they want payment policies to be tied to their feedback.

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Examining The Newly Covered Under The Affordable Care Act

October 30th, 2012

In a little more than a year, physicians and insurers will begin serving a large new patient population that looks, and in many ways behaves, distinctly different from today’s insured population. The Affordable Care Act’s coverage provisions — representing the single largest insurance expansion since the creation of Medicare in 1965 — present phenomenal opportunities for the health sector.

Under the 2010 law, revised by the Supreme Court ruling at the end of June, up to 30 million people are expected to gain health insurance coverage. Nearly one-third will move onto Medicaid; almost a quarter will enroll in plans sponsored by an employer; and 45 percent will purchase insurance through new state-sponsored online marketplaces known as exchanges.

Public exchanges will become operational in 2014. By 2021, they are expected to generate $205 billion in insurance premiums. It is a market too big to ignore. But attracting and serving this new group will not be easy for state governments or private industry. And although 2014 may feel far away, the time horizon for preparing is tight.

To draw a more comprehensive portrait of the uninsured Americans under age 65 who stand to gain coverage under the law, PwC’s Health Research Institute (HRI) analyzed the federal Current Population Survey, the Medical Expenditure Panel Survey and projections by the Congressional Budget Office. PwC’s HRI did a separate analysis of the exchange population. For both industry executives and policymakers, the data contain some reassuring news and a few warning flags

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