A new report from PricewaterhouseCoopers says that although the rate of growth in medical costs has been declining over the past five years, in 2009 this downward trend is expected to level off.
According to the report, actual medical costs are expected to grow 9.6 percent in 2009, compared with a 9.9 percent rate in 2008 and double-digit annual increases in prior years.
"While the continued slowing of medical cost growth is welcome, the fact that the rate of growth may no longer be declining as sharply is worrisome and could have implications for employers and workers," said David Chin, MD, leader of the Health Research Institute. "With medical cost growth already exceeding the overall inflation rate and inflation heating up in so many other sectors, healthcare providers, insurers and employers will have to monitor medical costs carefully if we are to avoid a resurgence of the double-digit annual increases seen in the past."
The report, "Behind the Numbers: Medical Cost Trends for 2009," is based on HRI analyses and a survey of more than 500 employers and provider-based health plans.
Cost drivers for 2009 are attributed to an increase in healthcare construction - which will be more based on consumer demands - and cost shifting from the uninsured, Medicare and Medicaid to private payers. This cost shifting is expected to continue to increase and the report says it will account for nearly one out of every four dollars spent by private payers in 2009.
Medical cost trends reflect the projected increase in the costs of medical services; the report points to them as the "numbers behind the numbers," which health insurers use to estimate the cost to provide coverage in the coming year and set premiums. Insurers and employers then use the trend projections to design benefit packages that will be offered to workers next fall.
In recent years, much of the progress on cost management has come from strategies to reduce medical costs for workers with private insurance. These strategies have included greater cost-sharing by workers, improved medical management and substitution of lower-priced treatments.
The report names the continued use of generic drugs and improved medical management of high-cost patients, such as programs that improve adherence to medication regimens as factors that will help to restrain the rate of cost growth in 2009.
"In the past, employers have tried to restrain increases in the insurance premiums their workers pay by changing their health plans or by increasing co-payments or deductibles. This has helped to keep insurance premium increases lower than the growth in medical costs," said Michael Thompson, global human resource services principal at PricewaterhouseCoopers. "However, employers' use of this strategy may be declining. About one-third of the employers we surveyed said they expected to increase cost-sharing in their medical plans in 2009. Increasingly, employers are adopting plan designs that help workers 'earn' discounts or bonuses for behavior that keeps them healthy, productive and engaged."
The report says that employers are responding by creating wellness programs, which focus on personalizing member experiences, and programs that rely on prevention and disease management and by reducing the number of privately insured, increasing cost shifting.
Other factors that may affect these cost projections include a possible recession in 2009, which could result in higher medical costs, and the outcome of this year's election, which the report says may have an effect on coverage for the uninsured.
As an employer, how are you responding to the increase in medical costs? What types of strategies are you considering in order to best to cover your employers in the coming year? E-mail molly.merrill@medtechpublishing.com.