Healthcare Spending Growth Rate Projected to Dip in 2016: Health Research Institute

PwC logoPwC’s Health Research Institute (HRI) projects U.S. medical inflation will dip to 6.5 percent in 2016, capping a 10-year trend of slowing employer medical cost-trend growth in the employer-sponsored market. In the latest installment of its annual report Medical Cost Trend: Behind the Numbers, HRI identifies three factors that are expected to reduce the medical growth rate in 2016:

  1. The Affordable Care Act’s looming “Cadillac tax” on high-priced plans which is accelerating cost-shifting from employers to employees to reduce costs;
  2. Greater adoption of  “virtual care” technology that can be more efficient and convenient than traditional medical care; and
  3. New health advisers helping to steer consumers to more efficient healthcare.

Despite the year-over-year slowdown, HRI also reported that medical inflation still outpaces general inflation, underscoring the challenges ahead for the health industry. In fact, Behind the Numbers identified two factors that will likely exert inflationary pressure on health spending in the year ahead:

  1. New specialty drugs entering the market in 2015 and 2016 will continue to push health spending growth upward; and
  2. Major cyber-security breaches are forcing health companies to step up investments to guard personal health data, adding to the overall cost of delivering care.

“While the health industry has improved in efficiency over the past decade, the slowing employer medical cost growth is because of the increased role of savvy health consumers facing higher cost-sharing responsibilities and more complex decisions,” said Kelly Barnes, PwC’s U.S. health industries leader. “This will continue to impact the New Health Economy in the coming years.”

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