Healthcare costs to rise 7.5 percent in 2013: report

By David Morgan

WASHINGTON | Thu May 31, 2012 1:29am EDT

(Reuters) - The cost of healthcare services is expected to rise 7.5 percent in 2013, more than three times the projected rates for inflation and economic growth, according to an industry research report released on Thursday.

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

The projected growth rate of 7.5 percent for overall healthcare costs contrasts with expectations for growth of 2.4 percent in gross domestic product and a 2.0 percent rise in consumer prices during 2013, according to the latest Reuters economic survey.

Healthcare 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 policymakers and lawmakers are wrangling over how to trim the budget deficit of $1 trillion a 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 healthcare inflation from earlier decades when annual costs rose by double-digits.

"We're in the early beginnings of a shift toward consumerism in healthcare. 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 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 healthcare 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 percent growth is nearly double a 3.9 percent rise in healthcare 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 $2.6 trillion healthcare system.

(Reporting by David Morgan; Editing by Jan Paschal)

http://www.reuters.com/article/2012/05/31/us-usa-healthcare-costs-idUSBRE84U05620120531