Senior Manager, Health Research Institute, PwC USFebruary 21, 2020
Spending on psychiatry grew 43% between 2014 and 2018, according to the Health Care Cost Institute’s (HCCI) new report on US healthcare spending trends. Use of psychiatric services was up 32% between 2014 and 2018; prices increased just 8% in the same period, according to the study of 2.5 billion medical and drug claims for 40 million Americans with employer-sponsored coverage.
Between 2017 and 2018, spending on psychiatric services swelled nearly 15%. The year-over-year growth in utilization of psychiatric services in that period was the largest of any category studied by the HCCI. Still, overall spending on psychiatric services accounts for just 3% of the total 2018 spending on professional services.
The report also found that admissions for substance use saw higher out-of-pocket prices compared with the other subcategories of inpatient admissions, with an average increase of $366 per admission from 2014 to 2018.
Continually higher prices for medical services, combined with an uptick in utilization, drove average spending on employer-sponsored insurance to almost $6,000 per person in 2018, outpacing 2017’s growth, according to HCCI.
The report found an increase in utilization for the first time in several years. But higher prices for medical services accounted for roughly three-quarters of overall spending increases between 2014 and 2018, after adjusting for inflation, the study’s authors wrote.
On the consumer side, out-of-pocket spending for items such as copays, coinsurance and deductibles increased 14.5%, or roughly $114, between 2014 and 2018.
HRI impact analysis
HRI’s “Medical Cost Trend: Behind the Numbers 2020” report projected a 6% medical cost trend for 2020, driven primarily by prices as well. HRI’s research also suggested that the industry would see increased use of psychiatry and mental health services. Employers have started to recognize the importance of helping their employees manage mental health and have been expanding access, which increases costs in the short term. But in the long term, employers may find that addressing mental health can deflate medical cost trend.
The frustration of consumers, payers and governments over prices has broken through in a divided Congress, as surprise medical billing and drug pricing are two areas where there is some hope for consensus.
The Trump administration has also taken action to increase price transparency through rule-making requiring hospitals to disclose negotiated rates and other charges. With these indicators suggesting continued price increases, and employees paying more out of pocket, the scrutiny on providers and payers is unlikely to dissipate.