9% Percent nation's employers can expect medical costs to increase in 2011.
"Health reform delivers only a minor impact on the underlying medical cost trends in 2011.Changes could bring significant new cost savings opportunities for employers and payers as well as new choices and transparency for workers buying insurance."
- Kelly A. Barnes, PricewaterhouseCoopers
"Companies are now working with their health plan providers for new post-recession, post-health reform strategies to sustain their programs and promote health and well-being as their next competitive advantage."
- Michael Thompson, PricewaterhouseCoopers
For the first time, the majority of the American work force is expected to have a health insurance deductible of $400 or more.
3 Deflators that will hold medical costs down
Employers are moving toward pre-managed care benefit design by increasing deductibles and replacing co-pays with co-insurance. The number of employers using co-insurance for physician visits has nearly doubled, and one-third use co-insurance for brand-name drugs.
Drug costs are tempered by generics. Drugs representing about $26 billion in annual sales are expected to go off patent in 2011, including the world's best-selling drug, Lipitor.
COBRA costs are expected to return to more normal levels in 2011. COBRA subsidies passed by Congress in 2009 created a 1 percent increase in the medical cost trend.
3 Inflators that will drive medical costs up
Hospitals shifting costs from Medicare to private payers and employers is seen as the No. 1 reason for higher medical costs trends. In 2011, Medicare, which is the single largest payer for hospitals, will reduce payment rates to hospitals for the first time after seven years of increases that nearly matched or exceeded inflation increases.
Provider consolidation is increasing, which is expected to increase their bargaining power. More physicians are getting out of private practice and joining forces with local hospitals or larger physician groups.
Spurred by stimulus funding that begins in 2011 and Medicare penalties that begin in 2015, hospitals will invest billions of dollars in certified electronic health record systems. While many hospital systems were planning to implement EHRs in the near future, the government's new regulations dramatically condensed their timelines to invest in technology, IT staff, training and process redesign.
