Prices, not utilization, continue to drive employer healthcare spending

Start adding items to your reading lists:
Save this item to:
This item has been saved to your reading list.

Ingrid Stiver Senior Manager, Health Research Institute, PwC US July 18, 2019

Healthcare prices continue to grab headlines, as scrutiny from consumers, lawmakers and the media intensifies. An analysis by HRI shows this attention to be justified. Prices have been a larger component of employer benefit costs than utilization since 2004; utilization has hovered around zero percent growth since 2006. 

A recent study from the Health Care Cost Institute found that utilization by individuals with employer-based insurance decreased by 0.2 percent from 2013 to 2017 while prices rose 17 percent during that time. 

The Centers for Medicare and Medicaid Services’ Office of the Actuary projected in February 2019 that healthcare-specific price growth will accelerate between 2020 and 2027, driven by higher healthcare sector wages and an improving economy where consumers are less sensitive to healthcare prices as compared to recent years.

Employers are concerned that the prices they pay are much higher than those paid by Medicare. A study published in 2019 by the RAND Corporation with support from the Employers’ Forum of Indiana and other employer coalitions found that self-funded employers across 25 states were paying on average 204 percent of the Medicare rate for inpatient hospital stays and 293 percent of the Medicare rate for outpatient services from 2015 to 2017, with large variation between states and hospital systems. 

Some states such as Michigan, Pennsylvania, New York and Kentucky had average rates of up to 200 percent of Medicare rates while others like Colorado, Montana, Wisconsin, Maine, Wyoming and Indiana had average rates of 250 percent or more of Medicare rates. The study also found that prices among hospital systems varied nearly threefold from 150 percent of Medicare rates up to 400 percent. 

For citations, implications and insights, please read our full report, Medical cost trend: Behind the numbers 2020.
For more of HRI’s insights and content, visit our Regulatory Center and report library.

Contact us

Ingrid Stiver

Ingrid Stiver

Senior Manager, Health Research Institute, PwC US

Benjamin Isgur

Benjamin Isgur

Health Research Institute Leader, PwC US

Follow us