Michigan Association of Health Plans

Healthcare costs increasing at unsustainable pace

Medical costs are poised to continue their relatively flat growth in 2019, but researchers say the steady trend is unsustainable for consumers.

The expected 6% growth in 2019 aligns with the 5.5% to 7% trend over the past five years—a welcome change from the double-digit spikes in the 2000s—but higher costs haven’t translated to similar gains in consumers’ health and productivity, said PricewaterhouseCoopers researchers who studied employer-sponsored healthcare spending.

Expensive new medical services and drugs and market consolidation are driving higher costs, said Barbara Gniewek, a health services principal at PwC. “It looks like costs are stabilizing, but they are still going up at a rate above inflation,” she said.

“They are still increasing at an uncontrolled level and are ultimately unsustainable.”

As health systems consolidate and snap up physician practices, prices typically rise through facility fees and other fixed costs, according to the report.

Providers, employers and health plans are offering consumers new access to care through telehealth, retail and urgent-care clinics. The long-term goal is to decrease spending, but better access often leads to higher utilization in the short-term, PwC researchers said.

“There’s no question that it’s critical to have more access points, but there’s also a risk that additional access will lead to a lot of unnecessary care,” said Ryan Schmid, CEO of Vera Whole Health, which contracts directly with employers for primary-care services. “You have to align financial incentives.”

Vera Whole Health has been expanding its direct primary-care model that aims to manage supply chain costs, perform routine care in lower-cost settings and refer consumers to the highest-quality, lowest-cost providers.

The Seattle-based company’s growth is one indication that employers are stepping in to try to bend the cost curve.

To continue to drive costs down, employers and health plans likely will have to tackle prices—and not just drug prices, according to the report, which used data from industry executives, health policy experts and health plan actuaries whose companies cover more than 75 million employer-sponsored members.

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