Healthcare spending in the United States is expected to grow at a historically low rate of 7.5 percent next year, according to the annual “Behind the Numbers” report on medical cost trend, published Thursday by the Health Research Institute (HRI) of PwC U.S.
Medical inflation has been lower than expected for the past three years, and recalibration of previous estimates shows a low range of 7 percent to 7.5 percent from 2010 through 2013, said the report.
“To estimate medical cost trend, HRI conducts research each year to identify new and relevant factors that accelerate or reduce cost trend,” said Benjamin Isgur, director, Health Research Institute.
The research cites the sluggish economy, increased focus on cost containment by the industry, lower use of services by cost-conscious patients and efforts by employers to hold down expenses as the main factors driving slow spending growth.
Isgur notes another reason for low spending growth is the recent patent expiries of some of the country’s most popular prescription drugs.
“Many blockbuster drugs have recently gone off patent, which will have a major effect on lowering drug spending in 2013,” he said.
Consumer choice will also have an impact, said Isgur.
“One of the slowest areas of cost growth has been in physician services, and this trend is expected to continue in 2013 as consumers choose alternatives, such as workplace and retail health clinics, telemedicine and mobile health, to the traditional doctor’s office visit,” he noted.
PwC predicts the slowdown will be a long-term trend.
“We believe employers shifting more expenses to their employees through higher deductibles, copays and coinsurance is starting to change behavior and will ultimately reduce growth rates,” said Isgur. “At the same time, doctors, hospitals and drug makers are weaning themselves off of fee-for-service and moving to a payment model with better incentives to improve patients’ health and reduce total medical costs.”
Isgur expects industry stakeholders to reassess their business practices as a result of the slow growth.
“If what we are seeing really is the new normal in healthcare, it means that doctors, hospitals, pharmaceutical companies, medical device companies, health insurers and even employers are all going to need to reevaluate their strategies and look for innovative, collaborative ways to thrive in this new environment,” said Isgur.
“After years of double-digit increases in healthcare spending, we may be finally tapping the brakes on the runaway train the country has been on,” he said.