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.Read the rest of this entry »