Medical cost trend in 2014 will dip even lower than in 2013.
Informed consumers & changing operating models
Employers & individual consumers are a powerful and growing force in the health ecosystem.
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The data tells the story.
Defying historical patterns—and placing added tension on the health industry—medical inflation in 2014 will dip even lower than in 2013. Aggressive and creative steps by employers, new venues and models for delivering care, and elements of the Affordable Care Act (ACA) are expected to exert continued downward pressure on the health sector. Read more
Kelly Barnes, partner and US health industries leader, discusses HRI's projected spending growth rate for 2014.
Barnes describes key factors slowing healthcare spending growth, including increased use of retail health clinics, employers tapping "high performance" care networks, and reduced hospital readmissions.
Barnes identifies factors increasing healthcare spending next year including growth of specialty drugs and ongoing industry consolidation.
In depth discussion
Healthcare organizations, hurt by a squeeze on reimbursements and what might best be described as a recession “hangover,” have spent the past few years adapting to more modest growth rates. The industry will continue those efforts in 2014, including pushing care to locations and personnel that cost less.
The tepid economic recovery continues to impact the health sector. The slowdown—and even decline—in personal wealth has tamped down demand for healthcare. As we reported a year ago, the sluggish recovery has created a “new normal” in healthcare spending patterns.
Individual consumers, bearing more financial responsibility for their medical bills, are questioning and sometimes delaying procedures, imaging, and elective services. New delivery models, such as accountable care organizations (ACOs) are promising, but their prospects for significant savings remain largely unproven.
The ACA will also play a role in the slowdown in 2014, with hospitals working to hold down expensive readmissions (or face the law’s penalties) and employers being given greater power to influence employee behavior through increased or discounted premiums—up to 50% in some cases.
Each year, HRI issues its projection for the following year’s medical cost trend based on activity in the market that serves employer-based insurance. For its 2014 projection, HRI interviewed health plan actuaries, industry executives and health policy experts. HRI also analyzed results from PwC’s 2013 Touchstone Survey of more than 1,000 employers from 35 industries. In this year’s report, we identified:
Four factors deflate medical cost trend in 2014
Two factors inflate medical cost trend in 2014
What this means for your business
Employer engagement and individual consumers are a powerful and growing force in the health ecosystem. To succeed, healthcare organizations should fashion strategies around new demands for value.