Medical device makers take heed: If you're developing expensive technologies that have more "wow" factor than "value-add" to the healthcare system, you might want to start reworking your company's mission- or risk faltering.
That's the word from Michael Thompson, principal at PricewaterhouseCoopers' (New York) global human resource solutions group, whose Health Research Institute just released projections of medical cost trends for 2010- that healthcare costs for U.S. businesses are expected to grow by 9% next year.
"Long term, the focus is going to be on value," Thompson told Medical Device Daily. "New medical technologies will have to be focused on adding value to the system and weeding out technologies that are costly and don't add as much value."
The PricewaterhouseCoopers report, "Behind the Numbers: Medical Costs Trends for 2010," points out that the healthcare cost increase is a bit lower than in previous years, with medical costs growing by 9.2% in 2009 and 9.9% in 2008. But the trend is clear that healthcare costs are way ahead of inflation and wage increases.
"It's a combination of things," Thompson said. "Healthcare prices continue to rise in spite of the fact that the consumer price index is falling. An increased use of services is a contributor to healthcare cost increases. Some of that is aging and health behaviors. But the use of new technology contributes."
The report teases out the various factors that are influencing this rise in medical costs. Rising unemployment, an acceleration of healthcare utilization in anticipation of job losses (along with insurance), more people relying on Medicaid and an aging population's demand on Medicare all are factors driving up the price of healthcare.
"The implications are that it reinforces how big an issue the cost pressures are on healthcare in general," Thompson said. "Employers are increasingly feeling the burden of healthcare costs at a time when they are feeling pressure on their own revenues. Some are pushing more costs on to their employees. It's becoming a more and more critical issue."
The report highlights what the authors call a "perplexing contrast of health spending growing amid a deflated general economy" and predicts that, in addition to the 9% growth in medical costs next year (which will continue to outstrip inflation and increases in worker earnings), the downturned economy and a prospect of healthcare reform will help to slow the increase of medical costs eventually.
At the same time that employers push those increases to employees, more than two-thirds intend to expand wellness and disease management efforts, even though they think it won't help to reduce overall costs.
Even if President Barack Obama's administration can enact healthcare reforms, the report indicates that it won't have an impact on costs until 2011 or later.
The real solution to rising costs? Get to the root of the problems, Thompson said.
"A lot of the root causes are being discussed in the context of healthcare reform," he said. "Issues around not having adequate information about what works and what doesn't are important comparative effectiveness will continue to grow. I think that if, as part of healthcare reform there are significant changes in the economics of how people make their living in this system, then that could provide a curve in the road for increasing prices."
He said that healthcare reform itself will not, however, have a mitigating impact in the short term.
"A lot of reforms are focused on a longer-term point of view or perspective," Thompson said. "The fact that healthcare costs continue to rise even in the most severe downturn we've had in almost a century is a call to action that we have to do something.
"That something could vary. I would say that a big piece of this has to get at the root cause issue as to why costs continue to grow on an unmitigated basis. We have a third-party system that rewards volume over value. We are going to move toward provider payment and friendly consumer incentives that are better aligned with thoughtful consumption of resources and alignment around improved health behaviors."
For the report, PricewaterhouseCoopers' Health Research Institute surveyed more than 500 employers and an unspecified number of provider-based health plans.
Other trends that could curb healthcare costs, in addition to reform include:
• Reduced growth rate of drug spending. The health plans surveyed for the report said they are noting smaller growth in drug spending and increased use of generics. As more blockbuster drugs go off patent in 2010, this trend will increase. The Centers for Medicare & Medicaid Services now reports that 67% of all drugs were generic in 2007.
• Increased use of high-deductible health plans. More American workers than ever are in high-deductible health plans, which should lower utilization of services. The report found that 20% of employers expect to add a high-deductible health plan as an option for employees within the next two years.