Healthcare costs may look like they are stabilizing, but the numbers warrant a closer look as increases are reaching unsustainable levels, climbing to rates higher than inflation–according to the Medical Cost Trend report released earlier this month by PricewaterhouseCooper’s (PwC) Health Research Institute.
“The economy, wages and the Consumer Price Index are not growing at the same rate as health-care costs, and that’s troubling,” commented principal at PwC Barbara Gniewek.
Since 2007, medical costs have been on a perpetual decline but have plateaued in the last five years between 5.5 and 7 percent. Although medical cost projections for 2019 are aligned with that trend at six percent–seemingly stable–it is unsustainable in the long term.
PwC’s report attributes the main drivers of recurrent costs to certain demographics. The baby boomer generation has more complex health needs and higher costs, social drivers like poor wellness and prevention measures leads to a sicker population and higher costs, and inflation.
According to the report, “demonstrating value” is essential:
- Providers: To remain competitive, providers need to demonstrate value by delivering consistent outcomes at predictable prices and offering easy access to services in the right care setting.
- Pharmaceutical and life sciences: Consider differentiating using clinical decision making tools and other value-added services such as companion diagnostics to offer personalized treatments to patients.
- Payers and employers: Consider offering a value plan option with a limited network focusing on quality and customer satisfaction along with pricing transparency tools to demonstrate savings and value.
There is also increased scrutiny upon large healthcare mergers that some contend lower the quality of care and increase prices as they corner the market and monopolize on the lack of consumer options. The Health Research Institute also pointed to provider mega-mergers as contributors to inflating health prices, “the provider landscape will grow more concentrated after several recently announced mega-deals are completed. Prices tend to rise when two health systems merge and the consolidated entity gains market share and negotiating power.”
In an article by Modern Healthcare, Martine Brousse, patient advocate in Santa Monica, Calif. said, “as large corporations gobble up facility after facility, it appears that caring at a human level is being lost.”
This past year alone, the healthcare market experienced a wave of mergers with giant companies announcing deals to join forces. Cigna proposed a $67 billion deal to purchase Express Scripts months after a mega deal between CVS and Aetna for $69 billion. Walmart is on the prowl to add to its pharmacy titan as it sets its eyes on Humana. Earlier this year, three e-commerce market movers announced a healthcare conglomerate of their own–Amazon, Berkshire Hathaway and JPMorgan Chase. Billions of dollars being exchanged in a sector that comprises almost 20 percent of the nation’s total GDP is bound to have certain effects on the care patients will receive and at what cost.
Drug spending, government regulation and technological innovation can also have significant impacts on employer spending.
To read the full report by PwC, click here.
To read more about monopolies in the healthcare market, visit Modern Healthcare’s article.