PwC Predicts Growth in Healthcare Spending Down in 2014

PwC Predicts Slow Down in Healthcare Spending in 2014Decline in Healthcare Spending Growth Will Continue

PwC’s Health Research Institute (HRI) provides research and analysis on trends impacting various industries including healthcare. HRI publishes the results of its research including an annual report on healthcare spending. For this year’s report, HRI predicts healthcare inflation in the U.S. to dip to 6.5% in 2014. In its annual report, Medical Cost Trend: Behind the Numbers,  HRI researchers say the continued slowdown in the growth rate of healthcare spending “defies historical post-recession patterns” with the slowdown sustained as the Affordable Care Act (ACA) kicks in next year and adds millions of newly-insured Americans to the system.

HRI researchers indicate the continued decline in healthcare spending growth is a “signal of progress in the quest to bend the cost curve.” Still, the authors note the slowdown does bring financial challenges as the industry pivots to respond to policy changes and new healthcare delivery models. Consumer also are having a big impact as they continue to delay care, use few services and choose less expensive options for their care (retail clinics, urgent care centers and mobile health devices.)

Deflation and Inflation Factors
In the HRI report, researchers predict the actual net growth rate in medical costs in 2014 of 4.5%.

Four key factors that will “deflate” medical cost trend in 2014:

  • Convenient care is efficient care
  • High performance care networks cost less
  • Readmissions ratchet down
  • High deductible goes mainstream

Two key factors  that will “inflate” medical cost trend in 2014:

  • Specialty drug costs reverse generic drug savings
  • Industry consolidation can lead to higher costs

So how will all this impact healthcare providers? From HRI:

Health organizations that already have been hurt by a squeeze on reimbursement and a recession hangover should brace for additional financial pressure.  Uncertainty about the impact of ACA implementation and what to expect from a largely unknown, newly-insured population are manifested in seemingly contradicting themes:  a declining medical cost trend and rising insurance premiums, particularly in the individual market.

You can find the report and in-depth analysis on the PwC website.