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Published: Wednesday, 5/18/2011 - Updated: 4 years ago

Health costs likely to rise faster in '12, study warns


LOS ANGELES -- Employers can expect to see an acceleration in health-care cost increases in 2012, with expenses rising 8.5 percent next year, according to a study released Wednesday from PricewaterhouseCoopers.

The 30-page study said the recession put a lid on health-care costs, which should keep the inflation rate to 8 percent for 2011, but those increases are getting steeper as the recovery gains momentum.

"Now, a few months into 2011, employers and health plans say utilization remains somewhat deflated, but they're already worried about a rebound in 2012," the study said. "Add to this recessionary effect the changes brought on by health reform, and the variables affecting cost trends in 2012 become an interesting blend of reactions."

PricewaterhouseCoopers surveyed 1,700 employers from 30 industries along with hospital executives and health-plan actuaries. It found that three main factors will drive up medical costs next year.

First, consolidation among hospitals and physicians is snowballing. While that should increase efficiency, payers worry about the impact of consolidation on rates. Second, patient costs for Medicare recipients will rise 3.3 percentage points more than hospital rates. And third, post-recession stress has taken a toll on worker health.

But the study said employers will try to keep a lid on costs and the actual medical inflation rate for employers should be closer to 7 percent.

It also says that a number of factors will deflate medical pricing, including cost-sharing by employees through such vehicles as higher deductibles, brand-name drugs losing their patents, and adding costs to employees who venture out of the health network for care.

The study said spending by insurance companies has grown the most for outpatient and inpatient care in the past five years, along with miscellaneous spending. There was slower growth in drug costs and physician expenses.

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