NEW YORK, June 18, 2009 (GLOBE NEWSWIRE) -- Even after the U.S. economy recorded its worst contraction in a quarter-century, healthcare costs for the nation's employers are expected to grow by another nine percent next year, according to PricewaterhouseCoopers' Health Research Institute which today released the first reported projections of medical cost trends for 2010.
The nine percent projected cost increase is a slightly slower rate of growth than in previous years. Medical costs grew by 9.2 percent in 2009 and 9.9 percent in 2008. Despite the modest slowdown, medical cost increases continue to significantly outpace inflation and wage increases.
In its paper Behind the Numbers: Medical Costs Trends for 2010, PricewaterhouseCoopers LLP identifies the factors that influence medical cost trends. One of the drivers expected to increase medical costs in 2010 is that American workers are accelerating their use of healthcare in anticipation of losing their jobs and, potentially, their health insurance coverage. In addition, rising unemployment is resulting in an increase in the uninsured and underinsured population, a drop in membership in commercial health plans and a higher percentage of the population covered by Medicaid, all of which are driving up medical costs trends. These trends are offset by factors expected to drive down medical cost, including the longer-term promise of health reform and potential for high deductible health plans and wellness programs to restrain costs.
Medical costs are the costs of healthcare products and services assumed by private health insurance actuaries in setting insurance premium levels for the year ahead. The information is used by employers to make changes to their benefit plan designs as a way to offset rising costs.
In the last five years, health insurance premiums have increased four times faster than wages, a trend that is expected to continue in 2010. With their corporate profits pounded in 2009, employers told PricewaterhouseCoopers that they will push more of the costs of health insurance to their workers in 2010 while expecting greater responsibility from workers for managing their personal health.
- Forty-two percent of employers surveyed by PricewaterhouseCoopers said they would increase employees' share of healthcare costs.
- Forty-one percent said they expect to increase medical cost sharing through plan design changes.
- More than two-thirds of employers are offering wellness and disease management programs; however, few said they are very effective at lowering costs.
"The recession is creating a tug of war between upward and downward pressures on medical costs," said Dr. Jack Rodgers, managing director in the health policy economics group of PricewaterhouseCoopers LLP. "Healthcare organizations are finding their revenue falling and are trying to increase prices. However, with most prices holding steady or falling, health plans will put pressure on providers to hold the line on medical costs."
In addition to the prospects of health reform, certain trends are helping to deflate health spending. According to PricewaterhouseCoopers, these trends include:
- Ongoing decrease in the growth rate of drug spending. Health plans report they are seeing much smaller growth in drug spending with the increased use of generic drugs. In 2010, five more blockbuster drugs will go off patent, and the number of patent expirations will increase in 2011 and 2012. According to the Centers for Medicare and Medicaid Services, 67 percent of all drugs were generic in 2007.
- Increase in wellness and disease management programs. Employers are more focused on wellness and disease management programs, though participation among eligible employees remains low at around 40 percent for wellness programs and 15 percent for disease management programs, according to PricewaterhouseCoopers. Employers are looking to health plans to provide greater education and incentives to increase participation.
- Increase in high deductible health plans. A growing number of American workers are now in high-deductible health plans, which are expected to lower utilization of health services, partly because greater awareness of medical costs could reduce demand for medical care but partly because cash-strapped workers lack the resources to pay for medical procedures. Twenty percent of employers surveyed said they would add a high deductible health plan as an option to their benefit plan design over the next two years.
"Higher medical costs are getting even greater scrutiny in this down economy, and employers are squeezing dollars out of their programs to save money. As the economy recovers, employers will refocus on more sustainable longer term approaches to medical cost containment based on an increasingly shared interest between employers and their workers," said Mike Thompson, principal, PricwaterhouseCoopers global human resource solutions group.
This is the fourth consecutive year that PricewaterhouseCoopers has provided an estimate of year-ahead medical costs trends. The complete report may be accessed at www.pwc.com/medicalcosts2010.
Methodology
In preparing "Behind the Numbers: Medical Cost Trends for 2010," PricewaterhouseCoopers' Health Research Institute (HRI) reviewed past and projected medical cost trends and the drivers of change behind them. This was undertaken through a series of interviews, analysis of published reports, and focused surveys. HRI conducted a survey of more than 500 employers and numerous provider-based health plans to discover common themes and trends in cost influencers.
About PricewaterhouseCoopers' Health Research Institute
PricewaterhouseCoopers' Health Research Institute (http://www.pwc.com/hri) is an unparalleled resource for health industry expertise. By providing cutting-edge intelligence, perspective and analysis on issues impacting the health industry, HRI assists executive decision-makers and stakeholders worldwide in navigating their most pressing business challenges. PricewaterhouseCoopers is one of the only firms with a dedicated global healthcare research unit, capitalizing on fact-based research and collaborative exchange among our network of professionals with day-to-day experience in the health industries.
About PricewaterhouseCoopers' Health Industries Group
PricewaterhouseCoopers' Health Industries Group serves as a catalyst for change and is the leading advisor to public and private organizations across the health continuum, including payers, providers, academic institutions, health sciences, biotech/medical devices, pharmaceutical companies and employers. With a distinctive approach that is collaborative, multi-disciplinary and multi-industry, PricewaterhouseCoopers draws from its broad perspective and capabilities across and beyond the health industries to help solve the array of emerging complex problems health organizations face, lead cultural and clinical transformation, and create a new sustainable model for care delivery that is quality-driven, patient-centered and technology-enabled.
PricewaterhouseCoopers' Health Industries' clients include 40 of the top 100 hospitals in the U.S. and 16 of the 18 best hospitals as ranked by US News & World Report; all 20 of the world's major pharmaceutical companies; all of the top 20 commercial payers in the U.S.; municipal, state and federal government agencies and many of the world's preeminent medical foundations and associations.
PricewaterhouseCoopers has a network of more than 4,000 professionals worldwide and 1,200 professionals in the U.S. dedicated to the health industries. Our health industries professionals include a cadre of physicians, nurses, ancillary health providers and some of the nation's leading minds in medicine, science, information technology, operations, administration and health policy.
About PricewaterhouseCoopers
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