Health care costs will grow an average of nearly 10% in 2009. Pricewaterhouse Coopers reports their anticipated health cost trends in the company’s latest issue of Behind the Numbers.

On the good news front, there are several cost decelerators: more employers are depending on targeted health management programs, and aggressive generic substitution for more expensive branded drugs. PwC found that two-thirds of employers have adopted disease management, such as using prescription drugs in lieu of surgical procedures. Furthermore, employers are focusing more on employee wellness for both cost-management as well as productivity, absenteeism and presenteeism. They’re bolstering the outcomes for these health investments through personalization.

The countervailing forces for health cost increases include the continued hospital capital projects (both replacing aging equipment and buildings as well as the medical arms race), and cost-shifting from government payers and the uninsured to private payers. PwC estimated that 1 in 4 private payer dollars goes to this category. This is primarily done by hospitals who are shifting the costs of under-compensated and uncompensated care to the commercial side of the revenue ledger.

Health Populi’s Hot Points: While employers are doing their level best to contain costs and optimize their health investments in employees, medical cost inflation will continue to exceed general consumer price inflation for the foreseeable future. PwC expects medical inflation to outpace the CPI for the next decade.

The growth in the share that public payers (governments) take on will result in the sector further pushing costs onto employers and private payers. This will continue until a solution is found to deal with Medicare, Medicaid and the uninsured. As this off-loading to the private sector continues, how will employers be able to continue to afford health coverage as it further eats into profit margins?

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