Pricewaterhouse Coopers' (PwC) Health Research Institute recently published its 10th annual Behind the Numbers report, which projects that the U.S. healthcare spending growth rate will slow and drop to 6.5% in 2016.
"I'm surprised and impressed that spending hasn't shot back up in the past two years with the economy back on track," said Ceci Connolly, Health Research Institute leader. She added that historically, it would go back up, but the industry is doing things to hold down costs.
How the industry is holding down costs
One of these cost-containment efforts, according to the report, is the emergence of health advisers to assist consumers in making healthcare decisions. Hired by insurers and employers, these advisers are creating their own "cottage industry," Connolly says. Companies provide financial incentives to consumers to choose better quality-rated hospitals and facilities by agreeing to cover the full costs of procedures at those facilities versus more expensive ones. "This is enabling consumers to make better decisions, increasing healthcare quality and lowering costs," she said.
For example, Honeywell International provides surgery decision support—a tool that gives employees resources for weighing options for various surgeries (hip, knee, back, hysterectomy and bariatric). A $1,000 penalty is incurred for those who pursue surgery but don't use the program. Employee participation jumped to 92% in 2013 from a very low number in 2012.
A second factor is the boom in telehealth due to advances in technology, relaxation of state and federal barriers and new Medicare coverage. An estimated 800,000 primary care consults will occur remotely this year alone, according to estimates by the American Telemedicine Administration. "Health systems and insurers should consider partnering with tech-smart companies that can offer a different type of network, clinical skill set, and equipment," the report suggested. "Retail health and outpatient clinics can also use virtual care to improve primary care access."
The forthcoming Cadillac Tax, set to go into effect in 2018, also appears to be having an impact on cots. Under this provision of the health law, health plans that exceed a certain annual limit ($10,200 for individuals, $27,500 for self, spouse and family) will be targeted with a 40% excise tax. Although not set to go into effect for another five years, many employers are already cutting back health benefits or increasing employees' deductibles—exerting a downward pressure on overall spending.
Where costs are increasing
The report also points to two factors that may lead to increased healthcare spending in the next year. Market entry of new specialty drugs, like expensive hepatitis C drugs, will continue with the push for personalized medicine and targeted therapeutics. A new class of cholesterol drugs (PCSK9 inhibitors), expected to be approved by year's end, could cost the healthcare system $23 billion annually.
In response to growing cybersecurity concerns, many healthcare companies are beefing up investments in this area. The past few years have seen several highly-publicized data breaches, resulting in multi-billion-dollar settlements. "Providers have strong incentives to spend now on cybersecurity to avoid high costs of future breaches," the report states. PwC estimates that preventative cybersecurity costs are about $8 per patient record versus $200 per patient record incurred with a major breach. "Companies are scrambling to fortify digital and security privacy," said Connolly.
The report notes four other key growth trends over the past 10 years: Healthcare spending has leveled off but is not declining; cost sharing reduces consumer use of health services; curtailing inpatient care lowers costs; and the Affordable Care Act has had minimal direct effects on employer health costs.
"While the health industry has improved in efficiency over the past decade, the slowing employer medical cost growth is due to the increased role of savvy health consumers facing higher cost-sharing responsibilities and more complex decisions," said Kelly Barnes, PwC U.S. health industries leader, in a statement.