Health care cost increases driven by specialty drugs, economy

Health care costs are poised to jump by 6.8% in 2015, a slight jump from the 6.5% projected increase this year, experts at PricewaterhouseCoopers’ Health Research Institute say.

PwC attributes the spike to a revitalized economy, the modernization of health care technology and the drastic increase in specialty drug use by 2020, says Michael Thompson, global human resources services principal at PwC. “We see drugs as being a key contributor,” he says.

According to PwC’s recent 2014 Health and Well-Being Touchstone Survey, 4% of patients use specialty drugs, accounting for 25% of total U.S. drug spending. He adds with the introduction of new Hepatitis C treatments, total Hep C spending is going to spike 209% by 2015 and will increase the medical cost trend by 0.2%.

Also see: Pharmacy benefits: What’s next?

PwC defines medical costs as per-capita health expenses that affect the market activity that impacts employer-based insurance. And so another large factor is the upswing in employer-provided high deductible plans, which “is spawning a new class of health care shoppers: price sensitive and willing to consider that less may be more,” the report notes.

PwC doesn’t predict runaway cost increases, but does expect further premium hikes. And, more importantly, health care cost increases are likely to spur higher deductibles in employer-sponsored health plans as a way to make employees more financially responsible for their care.

“The specialty drug rate increases are really killing employers,” Thompson says. “From the future perspective, increased consumerism and putting in plan designs that make employees make good decisions about their health … these are the things that are really going to drive behavior change.”

The report identifies other factors it says are constraining the growth rate of health care spending, including increased efficiency among doctors and hospitals and financial penalties for hospitals linked to patient outcomes.

“Structural changes aimed at delivering better-quality care at lower costs are starting to hold health-care spending in check,” the report says.     

Also see: 5 ways health care spending can be curbed

Other trends include wellness and disease management. “Wellness continues to be a mainstay,” says PwC’s Barbara Gniewek. “We do see employers trying to do things to help their employees be healthier. Even though they aren’t measuring the return on investment, they know it’s good and continue to do it.”

While the report does note a majority of employers find the wellness programs to be somewhat effective in mitigating health care costs, Thompson says the results don’t knock your socks off. “I look forward to the day when we see 40% [of employers ranking wellness programs] in the ‘very effective’ category,” he says.

The most common wellness programs include employee assistance programs, biometric screening, tobacco cessations and physical activity programs.

Also see: How to make wellness work

Additionally, a similar majority of employers find disease management programs to have a similar effectiveness on health care costs, with diabetes and asthma programs topping the list of programs most commonly used. 

For reprint and licensing requests for this article, click here.
Pharmacy benefits Healthcare plans Wellness
MORE FROM EMPLOYEE BENEFIT NEWS