PwC projects 2017 medical costs will continue to rise at the same rate as 2016. Signs point to larger increases in the future.
2017 will be a year of equilibrium for medical costs. The forces that increase health costs are being tempered by a demand for value in the New Health Economy.
• PwC’s Health Research Institute projects the 2017 medical cost trend to be the same as the current year – a 6.5% growth rate.
• There are signs that the decade’s slowing medical cost growth rate could tick back up as new healthcare access points increase utilization.
• Healthcare organizations must increase access to consumer friendly services while decreasing unit cost.
Medical cost trend over the years
Although next year’s growth rate is the same as last year’s, it still outpaces general economic inflation. This suggests a possible recalibration on cost-saving strategies – as the ones deployed over the last few years have run their course and may not be able to bend the cost curve with new inflators on the horizon.
Price, not utilization, is the force behind historical medical cost trend
In the early 2000s, price and utilization contributed to growth in healthcare costs. Since then, use of services has declined and higher prices are driving the growth. However, a close focus on both prices and healthcare delivery and access changes are needed to contain medical costs.
Roughly half of employer health costs are from hospital inpatient and outpatient spending; but prescription drug share is increasing
Not all components of healthcare contribute equally to employer costs. Roughly half of all medical costs come from hospital spending: 30% from hospital inpatient and 19% from hospital outpatient. Physicians account for about 30% and prescription drugs 17%.
Drug spending is still a relatively small portion of overall health spending, and, as such, concerns of ever-increasing cost growth from new cures may trigger false alarms.