After five years of slower growth, health-care spending will pick up again

After a five-year slowdown in the growth of health-care spending, the rate is expected to tick up again in 2015, according to a new report this morning from a health policy research group.

Amid historically low growth in the aftermath of the recession, the big question in health care has been whether spending would shoot back up again as the economy improved — or whether structural changes in the way health care is delivered and consumed would keep the growth rate down.

The new analysis from the PwC Health Research Institute suggests 2015 will see a modest increase in the rate of spending growth. The so-called medical cost trend is expected to increase from a projected 6.5 percent in 2014 to 6.8 percent in 2015. PwC points out, however, that relative to double-digit increases seen in the 1990s and 2000s, the growth rate isn't nearly as alarming.

The spending growth projection, the ninthyear that PwC has issued this report, is based on interviews with industry executives, policy experts and health plan actuaries for companies covering a combined 93 million members in the large-employer market. It cites a few major factors for what’s sparking the expected growth in spending this year:

  • The improving economy is moving people to get care that they delayed
  • The growth in specialty drugs (a topic getting much more attention these days)
  • The growing trend of hospitals employing physicians directly
  • Health systems’ investments in information technology as large-scale consolidation takes place

At the same time, the PwC analysis sees a few trends pushing down the growth in health care spending. PwC says there’s a greater focus on efficiency in the health-care system; the growth in high-deductible plans has created better shoppers; and the expansion of payment models that incentivize physicians to keep spending down.

Employers have been changing their behavior, too. In a separate survey of employers, PwC found about 85 percent have increased how much their workers pay for their care, or are at least considering increases. Meanwhile, enrollment in employer-sponsored high-deductible plans, as the following chart shows, has tripled in the past five years.


The report doesn’t try to predict what the future of health-care spending will look like beyond 2015. That will likely depend on how quickly the health-care system reacts to the pressures driving up spending.

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.
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