Deceleration In Health Care Cost Increases Predicted For 2008
Health care cost increases will continue to outpace inflation in 2008, but they should rise at lower rates than in recent years due to factors such as slower spending growth for prescription drugs, increased transparency and cost sharing with employees, improved IT infrastructure, and a more holistic approach to health management, a study published by PricewaterhouseCoopers (PwC) concluded.
Using data gathered from private insurers, the study predicted medical costs will increase in 2008 by 7.4% for consumer-directed health plans (CDHPs) and by 9.9% for preferred provider organizations (PPOs), health maintenance organizations (HMOs), point of service plans (POSs), and exclusive provider organizations (EPOs). For 2007, medical costs are projected to rise 10.7% for CDHPs, 11.9% for PPOs, and 11.8% for HMOs, POSs, and EPOs.
The study attributed the overall slowdown in medical cost increases in part to lower levels of growth in prescription drug spending. Researchers cited a number of factors that have contributed to this trend, including the introduction of fewer blockbuster drugs, a number of blockbusters going off patent, transition of some drugs to over-the-counter status, the acceptance of tiered formularies, and a lower rate of price growth. In particular, the study said, increases in generic dispensing have put the brakes on rising drug prices.
Improvements in price transparency and cost shifting to employees have also contributed to the deceleration in health care cost increases, according to the study. While CDHPs still make up a small percentage of employer-sponsored health plans, researchers said plan sponsors are adopting many of the broad principles of consumerism, such as discouraging unnecessary consumption of medical services, encouraging the use of preventive care, and promoting healthier lifestyles.
Finally, the study found, health care providers are beginning to make substantial investments in health information technology. With a strong digital backbone in place, payers should find it easier to manage both performance and compliance, while providers will be able to better coordinate care while reducing costs.
