Businesses, unions and others might want to see the repeal of the Cadillac tax portion of the Patient Protection and Affordable Care Act. But a new report from PwC (Price Waterhouse Cooper) says the Caddy tax will be a key “deflator” of upwardly spiraling national health care costs.

This “endorsement” of the tax on rich health care packages comes in a growth projection report by PwC that says the nation will see a slower growth pace for health spending in 2016.

Looking beyond next year, the report says that the Caddy tax is among the factors that could continue to pull in the reins on health spending as a portion of GNP. The tax doesn’t take effect until 2018.

But other factors, including the escalating cost of specialty drugs, will push even as the Caddy tax pulls.

For 2016, PwC forecasts a 6.5 percent health spending increase based upon current plan designs, with an alternative 4.5 percent increase after anticipated plan design changes are factored in.

Cost sharing has either been implemented or will be soon, said 85 percent of the employers responding to the survey. Virtual medical care will come into its own next year, the report says, offering another way to contain the cost of care.

But too much cost-sharing will undermine the point of health insurance: to keep employees healthy. More than a quarter of covered employees said they did not seek recommended medical care because they felt their share of the cost was too high.

Thus PwC foresees a shift in cost containment that will balance cost of care to the insured with ensuring that people use insurance to stay healthy, since a healthy population is actually the biggest factor in containing medical care cost escalation.

Here’s the report summary:

“In this year’s report, we identified the following factors expected to “deflate,” or reduce, the healthcare growth rate in 2016:

Looming “Cadillac tax” accelerates cost shift
Virtual care
New health advisers

Going the other way, there are two factors expected to “inflate,” or boost, the spending trajectory in 2016:

Specialty drugs
Cyber security

“More Americans with health insurance and an improving economy have not increased the medical spending trajectory. Structural changes have helped keep costs in check. But there is still much to be done as long as health spending continues to outpace gross domestic product and individual consumers and companies struggle to afford services,” the report says.

“Health companies must restrain costs when bringing new cures and technology to consumers. … Employers must pursue strategies that not only strengthen their bottom line but better equip workers to make informed health decisions – or they will all pay a high cost in the long run. User-friendly technology offers opportunities for greater transparency, remote care delivery and true comparison shopping.”

Instant Insights /

Cadillac tax could be major health spending cost 'deflator'

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