Consulting firm Aon provides an annual outlook on expected health care costs and trends for the year ahead. Here is part of that forecast for 2020.
High-cost specialty drugs, increases in care costs and declining care utilization will spark a 6.5% hike in employer-sponsored health benefits costs in 2020, according to a recent report.
Non-communicable diseases are driving health care costs across the world. Musculoskeletal, cancer, cardiovascular, diabetes and high blood pressure were the most common health problems in the U.S.
The 6.5% increase is similar to Aon’s projections for 2019. Ultimately, the firm expects that medical cost inflation will surpass general inflation by 3.8%.
“Employers, insurance carriers and the medical industry have done a commendable job of moderating cost increases in recent years, considering the headwinds of an aging population, high drug prices and rising chronic conditions,” said Will Sneden, Aon’s U.S. Health Solutions practice leader.
The growth in U.S. medical costs lags the rest of the world, which Aon expects to rise 8.0% next year. But the difference is mostly due to an expansion of benefits and slightly more price inflation worldwide.
Physical inactivity, obesity, poor nutrition, aging and excessive alcohol and substance abuse are driving risk factors for non-communicable diseases in the U.S.
“Many of the risk factors lead to chronic conditions with long-term medical costs that make them difficult to treat and result in long-term medical cost increases,” said Tim Nimmer, Aon’s global chief actuary for health solutions. “As a large portion of our waking hours are spent on the job, the workplace is a logical place to create a healthier culture and change behaviors.”
Nimmer said that he was surprised that excessive alcohol and drug use, including opioids, was only reported as a top risk factor in the U.S.
Consolidation in the health care industry is likely a key driver of healthcare costs, but there’s little sign of it slowing down.
Health systems continue to purchase medical groups and employ more physicians, giving them increasing negotiating power with health plans. Site-neutral payments, abolishing all-or-nothing contracting and capping out-of-network emergency care payments could improve competition, but face steep opposition from trade groups.
And payers have merged to help them counteract the power of growing providers because private employer-sponsored health plans are paying hospitals 2.4 times as much as Medicare for the same care. But economists argue that plan mergers decrease competition in the insurance market, give employers fewer choices and raise insurance costs.
The result of all this consolidation is that health care prices are growing faster than incomes and the economy, contributing to calls for an overhaul of the U.S. health care system.