The price of medical services and prescription drugs is increasing slower than before, according to new figures from the U.S. Bureau of Labor Statistics. Its welcome news for benefit brokers and employers after numerous years of watching health insurance premiums skyrocket.
The BLS recently released the consumer price index for July, bringing some good news about health care cost trends:
- Prices for physicians services declined 0.2% in July, after falling 0.3% in June.
- The price of prescription drugs increased 0.5%, down from 1.0% in June.
- Prices for medical care commodities (including medications and medical devices) grew 0.3%, down from 0.7% in June.
- Prices for medical services grew 0.1% in July, compared to 0.0% in June.
- Prices for hospital services increased 0.4%, compared to 0.2% in June.
Similar findings appeared in a study published by the journal Health Affairs this week. Specifically, Andrea Sisko and coauthors found:
- Total national health care spending in 2013 is predicted to have increased by only 3.6% the fifth consecutive year that the growth rate was below 4%. (Final numbers for 2013 are expected in December).
- By the years 2016-2023, health care spending will increase by 6.1% per year, much higher than todays growth rate.
The authors conclude that todays lower rate of growth in health care spending is mainly due to a general economic slowdown. When the countrys economic conditions are bad, financial concerns can prevent patients from seeking medical treatment and refilling their medications. In addition, a poor economy can lead employers to cut back on health benefits and/or reduce staffing, which means fewer people have jobs that come with insurance coverage.
The growth rate for health care prices has been lower than historical for a few years. We probably will see an increase as the overall economy gets better, said Jim Whisler, a principal with Deloittes health actuary practice.
He cites several factors contributing to the recent slowdown in health care price increases:
1) More health care being coordinated and integrated systematically;
2) Analytics that help to identify gaps in care, so the patient receives the care at the right time;
3) New payment models based on the value of the service provided; and
4) A push toward health care consumerism, making prices more transparent to the patient.
There are a lot of transparency efforts now, and I think awareness is being raised. That will have a long-term effect, Whisler said. The long-term trend, given the changes, I think is going to lead to lower trend rates than it would be otherwise. Simple math says the trend rates werent sustainable as they were.
Millions of more Americans have obtained health insurance, in large part because the Affordable Care Act established public insurance exchanges, required individuals to be covered and prohibited insurers from denying coverage to patients with preexisting conditions. The U.S. uninsured rate dropped from 18% in the third quarter of 2013 to 13.4% in April 2014, according to Gallup polls.
In the long term, having more people insured will reduce health care expenditures if more people seek medical treatment at the right time, rather than waiting until their condition is too severe, Whisler pointed out.
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