Study: Economy, reimbursement models slow medical spending through 2013

June 6, 2012

Healthcare spending is expected to grow at historically low rates next year, according to a new survey. Find out the reasons behind the trend, including the fastest-growing area of medical costs.

Healthcare spending is expected to grow at historically low rates next year, according to a new Health Research Institute (HRI) survey from PricewaterhouseCoopers (PwC) LLP.

The projections predict a pattern of slower medical growth, according to the study, down to 7% to 7.5% per year in the United States from 2010 to 2013. Spending decreases will be based largely on a lackluster economy, an increased focus on cost containment, decreased uses of services by patients, and efforts by employers to hold down expenses, predicts the assurance, tax and advisory services firm.

“A fourth year of relatively low growth suggests that the gap between healthcare spending and overall inflation may be narrowing to a more sustainable level,” PwC says.

“Slower growth in healthcare costs could be the ‘new normal,’ ” says Michael Thompson, principal of human resource services at PwC. “We’re seeing long-term trends that could keep cost increases in check. As employers shift expenses to their employees, for example, these workers are pursuing lower-cost alternatives. Even as the economy strengthens, changes in behavior by employers and consumers may help limit medical growth.”

Four factors will help deflate medical costs overall, the study suggests:

• market pressures to reduce medical supply and equipment costs,

• increased popularity of new methods to deliver primary care,

• increased availability of comparative cost information, and

• accelerated saving from pharmaceuticals going off patent.

Market forces are driving demand for improved outcomes and better cost-containment, too. On the flip side, the HRI study suggests that two factors are expected to inflate healthcare spending: greater access to healthcare from newly hired workers and renewed patient confidence in elective procedures.

And although physician care accounts for the largest segment of medical costs, outpatient care is the fastest-growing area, the survey says. Outpatient services currently represent18% of healthcare expenditures, and the study predicts 10% growth on average for 2007-2012.

“Employers and insurers will want to capitalize on the recent slowdown, while doctors, hospitals, and pharmaceutical companies will need to retool their business models to succeed in the new environment,” the study concludes.

The trend is significant, company representatives say. In fact, overall health spending posted the slowest growth in 2009 and 2010 than at any other time in the past 51 years.

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