Where are health care costs headed?

The 2017 Medical Cost Trend report from PwC’s Health Research Institute projects medical costs will increase by 6.5% next year, roughly in line with recent trends.

Although next year’s growth rate is projected to remain the same, it still outpaces general economic inflation. The institute speculates this could be a sign that cost-saving strategies might have run their course and may not be able to bend the cost curve with new inflators on the horizon.

PwC flags four key factors that will impact health care spending in 2017:

Convenience

The rise of retail clinics and other convenient access points is increasing utilization, with 40% of consumers saying they plan to seek care from a retail clinic this year. That should mildly drive overall costs up.

Behavioral health

New laws to ensure mental health parity will increase access and unlock pent-up demand, pushing up costs in the short term but potentially holding them down in the long term.

High-performance networks

The institute expects employers to explore new benefit strategies, shifting the focus from cost sharing to leveraging high-performing networks with higher quality and lower costs. About 43% of employers are considering narrow network health plans this year, up from 37% last year.

Aggressive pharmacy benefit managers

Pharmacy benefit managers are aggressively negotiating lower drug costs on behalf of employers, winning rebates and discounts for pricey drugs. Additionally, PwC anticipates political pressure may keep some of the largest drug cost increases in check.