June 18, 2013

Report: Medical cost growth slowing

The lower growth in costs comes even as the economy picks up and millions more people get coverage.

By RICARDO ALONSO-ZALDIVAR/The Associated Press

WASHINGTON - There's good news for most companies that provide health benefits for their employees: America's slowdown in medical costs may be turning into a trend, rather than a mere pause.

A report Tuesday from accounting and consulting giant PwC projects lower overall growth in medical costs for next year, even as the economy gains strength and millions of uninsured people receive coverage under President Obama's health care law.

If the calculations are correct, cost spikes because of the new health care law should be contained within a relatively narrow market segment. That would come as a relief for Democrats in an election year during which Republicans plan to use criticism of "Obamacare" as one of their main political weapons.

"There are some underlying changes to the system that are having an impact, and we can expect lower increases as we come out of the recession," said Mike Thompson of PwC's Health Research Institute, which produced the study. Cost "is still going up, but not as much as it used to."

The report comes with a caveat that sounds counterintuitive at first: self-employed people and others who buy coverage individually could well see an increase in premiums in 2014.

The reasons have to do with requirements in the health care law. For example, starting next year insurers must accept patients with pre-existing medical problems, who cost more to cover.

Also, new policies have to provide a basic level of benefits more generous in some cases than what's currently offered to individual consumers.

FACTORS DROPPING COSTS

Patients seeking more affordable routine services in settings such as clinics in retail stores.

Major employers contracting directly with hospital systems.

The government ramping up penalties on hospitals that have too many patients coming back with problems

Employers' ongoing effort to shift more costs to workers through higher annual deductibles.

 

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