PwC: Medical Cost Trend 6.5 Percent In 2016; 4.5 Percent After Benefit Changes

PwC’s Health Research Institute has released its 10^th annual report on Medical Cost Trend for the employer-based market.

PwC forecasts low growth in medical cost trend of 6.5 percent. However, after benefit changes such as higher deductibles and co-pays, PwC forecasts net growth rate of just 4.5 percent.  The report also notes growth of 300 percent since 2009 in the number of employers offering high-deductible plans.)

PwC lists both “inflators” and “deflators” contributing to this growth.

Deflators include:

• The “Cadillac tax” on high cost benefit plans. Although not kicking in until 2018, it is already influencing plan design.
• Virtual care. This encompasses telehealth and mobile health, which NCPA has endorsed.
• New health advisers, who help patients make better choices.

Inflators include: Specialty drugs, and cyber security. (This is the first I learned that security breaches were driving up costs. PwC estimates that the cost of a major data breach is $200 per patient record, versus $8 to prevent it.)

What is most unique about the PwC report is its conclusion that the rate of growth of health spending has been trending down since as far back as 1061 (although with a lot of variance, as shown in Figure 1.)

Figure 5 summarize the medical cost trend for the last ten years, as estimated by PwC.