U.S. health-care costs to rise 7.5 per cent in 2013: Report

Employer premiums to rise by only 5.5 per cent due to successful wellness programs
By David Morgan
|hrreporter.com|Last Updated: 05/31/2012

WASHINGTON (Reuters) — The cost of health-care services in the United States is expected to rise 7.5 per cent in 2013, more than three times the projected rates for inflation and economic growth, according to an industry research report.

But premiums for large employer-sponsored health plans could increase by only 5.5 per cent as a result of company wellness programs and a growing trend toward plans that impose higher insurance costs on workers, said the report by PwC.

The projected growth rate of 7.5 per cent for overall health-care costs contrasts with expectations for growth of 2.4 per cent in gross domestic product and a two per cent rise in consumer prices during 2013, according to the latest Reuters economic survey.

Health-care costs have long been known to outstrip economic growth and inflation rates, driving up government spending on programs such as Medicare and Medicaid at a time when federal policy-makers and lawmakers are wrangling over how to trim the budget deficit of US$1 trillion per year.

But PwC's Health Research Institute, which based its research on input from health plan actuaries, industry leaders, analyst reports and employer surveys, said data for the past three years suggest an extended slowdown in health-care inflation from earlier decades when annual costs rose by double-digits.

"We're in the early beginnings of a shift toward consumerism in health care. And we think that you'll see more of that in the coming months and years," said Ceci Connolly, the health institute's managing director.

More than one-half of the 1,400 employers surveyed by the firm are considering increasing their employees' share of health benefit costs and expanding health and wellness programs in 2013, according to the report.

Connolly said health plans with higher deductibles and co-pays for workers tend to dissuade unnecessary purchases and offer lower premium costs for employers, while successful wellness programs can reduce the need for medical services.

The report said prospects for higher growth are also being held back by the consolidation of hospitals and physician practices, insurance industry pressure on hospital expenses, a growing variety of primary care options such as workplace and retail health clinics, price transparency and the increasing use of generic drugs.

Upward pressure on health-care costs comes in part from a rebounding economy and the growth of new medical technologies, including robotic surgery and the nuclear medicine imaging technique known as positron emission tomography.

PwC's projection of 7.5 per cent growth is nearly double a 3.9 per cent rise in health-care spending that the federal government says occurred in 2010, the last year for which official figures are available.

The government survey includes Medicare and Medicaid spending, as well as over-the-counter pharmacy purchases, while PwC's report focuses on the private insurance sector of the US$2.6 trillion health-care system.

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