PwC: Medical Cost Trend Going Back Up Again in 2020

Blame prices not utilization says the consultant's report

Drug costs, chronic diseases, and increased use of mental health services will be three "inflators" on the 2020 medical cost trend, according to PricewaterhouseCooper's 14th annual report on medical cost trends affecting private health insurance.

Still, rising prices are the main driver of the cost trend, not increasing utilization, noted the PwC report. Utililzation hasn't increased since 2006, according to PwC.

The report, which came out last week, predicts that medical costs are going to increase by 6% in 2020 after either decreasing or staying level since 2016. "It is really just a price issue," said Barbara Gniewek, a PwC principal, in an interview this week.

Gniewek said high-deductible plans and HSAs have had the intended effect of keeping utilization down. She held out hope for price transparency and outcomes tools putting downward pressure on prices by encouraging people to shop for less expensive services and drugs.  She added a proviso: "Those tools have to be accessible." 

Gniewek called the growing fraction of specialty drugs costs "scary." In 2010, specialty drugs accounted for 19% of the total retail drug spend; in 2016, it accounted for 42%.  

PwC's report says that employers spend nearly four times as much on their employees with a chronic disease as they do on their "healthy" employees ($1,320 annually vs. $4,668).

The report says that increasing number of number of employers are offering mental health and depression programs (75% in 2018 vs. 34% in 2014). Costs may go up in the short run, says the report, but addressing mental health problems may be a "deflator" over the long haul because poorly managed mental health can increase costs dramatically,