Medical costs, the decline of employee healthcare cost-sharing in favor of performance-based networks, and changes in pharmaceutical benefits are among the key healthcare trends analysts are watching in 2017.
The industry consensus is that growth in medical costs will be consistent with 2016 — about 6 percent, according to research from both the National Business Group on Health (NBGH) and professional services network PricewaterhouseCoopers (PwC).
That may be deceptively comforting, however.
“A growth rate of 6.5 percent is more than twice the rate of economic inflation,” says Benjamin Isgur, Leader of the PwC Health Research Institute. “Medical cost trend is slowing significantly compared to 10 years ago, but employers paying these bills are still looking for more savings and efficiency.”
The Cost of Convenience
For patients looking for fast, lower-cost access to medical treatment, convenient care offers options — but increased availability and use of these services are affecting the overall cost of care.
New research from Accenture estimates that funding for on-demand healthcare companies will increase to $1 billion by the end of 2017. PwC predicts there will be more than 3,000 retail health clinics in the United States by 2017. That growth reflects consumer demand for such services. Two out of five consumers sought care at a retail clinic in 2016, and almost nine out of 10 said they would likely use those services in the future. While prices at retail clinics can be lower than at other points of care, analysts say the increase in utilization is bending medical cost trends upward.
The availability and use of telehealth services is also expected to increase. NBGH predicts that 90 percent of employers will make telehealth services available to employees where permitted, and that by 2020, nearly all large employers will offer telemedicine coverage.
Balancing Cost with Performance
Employee cost-sharing has often been a primary method used by employers to reduce the costs of health care. However, cost-sharing options such as high-deductible health plans with a health savings account — offered by 63 percent of employers — have reached an end point for controlling costs for employers. High-performance networks with limited provider choices and outcome-based payments are gaining more attention from employers. Research from PwC found that a high-performance network can reduce costs up to 35 percent, compared with a broad provider network.
“Employers are trying to increase the attractiveness of higher-performing providers and high-performance networks,” says Steve Wojcik, Vice President of Public Policy at NBGH. “Employers are also increasingly interested in accountable care organizations, medical homes and other types of alternative delivery arrangements that promise to increase care coordination, reduce costs and improve quality and outcomes.”
Approximately 43 percent of employers are considering shifting to a high-performance network, according to PwC.
Rising Costs, but More Competition
Although specialty drugs have long been a driver of high healthcare costs, the Large Employers’ 2017 Health Plan Design Survey from the NBGH revealed that, for the first time, spending on specialty pharmaceuticals is the most-cited factor in increasing medical costs. However, many employers are using programs to mitigate the cost of specialty drugs, including:
- More aggressive management protocols for use of such drugs
- Requirements that specialty medications be obtained through specialty pharmacists
- Implementation of a specialty tier within the pharmacy plan design
Additionally, pharmacy benefit managers are turning to aggressive tactics to drive down the costs of specialty drugs.
“Thirty percent of our clients experienced either no increase or a decrease in their spending on prescription medications in 2015,” says Heather Sundar, PharmD, Vice President of Clinical Programs at Express Scripts, the nation’s largest pharmacy benefit manager. “Our national preferred formulary is designed to create competition within therapy classes, and that’s how we deliver significant savings for payers. Payers who use the preferred formulary will save $5 billion between 2014 and 2017, with very minimal patient or physician disruption.”