Are Healthcare Cost Trends Decelerating?
For several years, national healthcare expenditures have continued to climb at a pace that is outstripping the
Slower spending growth for prescription drugs
According to the PWC study, pharmaceutical spending has decreased significantly due to variables such as the introduction of fewer high-impact drugs, some drugs going off patent, other drugs transitioning to over-the-counter status and a lower rate of price growth. One key variable is the increased dispensation of generic drugs. The IMS Health 2005 World Outlook estimates that generics accounted for 53% of all prescriptions filled nationwide in 2005, and the volume of unbranded generics in 2006 grew 13% over the previous year. Some medical carriers have even introduced programs to waive generic co-payments or offer free samples to encourage members to move toward lower-costing generic alternatives.
Increased transparency and cost sharing with employees
More employers are encouraging cost-sharing measures as an integral part of their benefit plan design. While the movement toward widespread acceptance of consumer-directed health plans (CDHPs) has been slow, a lower medical cost trend in these plans could increase adoption over the next several years. Combined with the tax advantages they provide, CDHPs are expected to triple in market share by 2008, according to PWC researchers.
Total-health-management approach to benefits
The number of employers investing in wellness initiatives and adopting wellness-based incentives is also increasing at a rapid pace. Businesses are more aware of the potential return on investment in wellness programs (some companies received a $3 to $1 ROI), as well as the long term impacts on employee health. Further, employers are urging workers to become more involved in the process and “own” their health.
Broadening of the digital backbone in healthcare
While opinions on the impact of electronic medical records and other technologies continue to differ among healthcare experts, a recent CIO Insight study estimates that widespread adoption could save as much as $162 billion a year. More providers are investing in EMRs and other health information technology because they realize widespread adoption can reduce preventable medical errors and improve overall care management.
The perceived deceleration of medical cost trend in 2008 is expected to lower premium increases as well, but it is unclear how substantial the impact will be. Regardless, it appears that the consumerism movement is helping to slow the trend, and in the process, changing the prospects of the healthcare industry for the better
To download the entire PWC study, click here.
Questions or comments about this article? Email us at comments@hcwbenefits.com.
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July 6, 2007
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