Ten Takeaways From PwC’s Medical Cost Trend Behind The Numbers 2020

By Clive Riddle, June 21, 2019 

PwC's Health Research Institute has just released their 14th annual report on medical cost trends: Medical cost trend: Behind the numbers 2020, which projects the 2020 trend to be a six percent cost increase. As PwC's HRI describes their 47-page report, they project "the growth of private medical costs in the coming year and identifies the leading trend drivers.... based on the best available information through June 2019. HRI conducted 55 interviews from February through June 2019 with health industry executives, health benefits experts and health plan actuaries whose companies cover more than 95 million employer sponsored large group members about their estimates for 2020 and the factors driving those trends. Also included are findings from PwC’s 2019 Health and Well-being Touchstone Survey of more than 550 employers from 37 industries as well as PwC HRI’s national consumer survey of 2,500 US adults."

Here’s Ten Takeaways from their 2020 report: 

  1. Small Uptick: The Medical Cost trend, still rounding to double digits in 2007 (11.9%) and 2008 (9.9%), trended downwards subsequently, to round to six percent since 2016 (6.2%), but have ticked up since the low-water mark of 5.5% in 2017 (and 5.7% in 2018-2019.)
  2. Price, Not Utilization: “Prices have been a larger component of employer benefit costs than utilization since 2004; utilization has hovered around zero percent growth since 2006. Utilization by individuals with employer-based insurance decreased by 0.2 percent from 2013 to 2017 while prices rose 17 percent during that time.”
  3. Impact of High Deductibles: “Average deductibles for employer-sponsored plans tripled between 2008 and 2018. This increase likely has led to a low utilization trend because employees are delaying or forgoing care due to their deductible.”
  4. Stall in HDHP Growth: “The shift to HDHPs by employers seems to have stalled. With 84 percent of employers offering an HDHP option in 2019 and a tight labor market, employers may not be as quick to push HDHPs in 2020.
  5. Acceleration in Retail Rx Spending: “Starting in 2020, retail prescription drug spending growth for private health insurance will begin to increase, hitting between 3 percent and 6 percent annually through 2027.24 The growth in spending can be attributed to the waning impact of generics on the market and the introduction of new drugs.”
  6. Specialty Drug Million Dollar Drugs Pipeline: The portion of total retail drug spending on specialty drugs continues to grow. “We are at an inflection point with drugs in the pipeline. We thought hep C was expensive at nearly $100,000 per treatment. Many drugs in the pipeline are life-altering and come with a price tag of $1 million to $2 million per treatment.”
  7. Growth in Chronic Disease Spending: "Spending by employers on individuals with chronic diseases is nearly quadruple [3.5x] that of healthy individuals while spending on individuals with complex chronic diseases is eight times higher" [8.2x].
  8. Growth in Onsite Clinics: “38 percent of large employers offered an onsite health clinic in 2019, up from the 27 percent that offered a clinic in 2014. An additional 13 percent said they were considering adding one.”
  9. Telehealth Potential: “49 percent of consumers with employer coverage said they are willing to use telehealth in place of an in-person visit.”
  10. Underutilized Wellness and Prevention programs: “For decades, employers have invested in health and wellness and prevention, yet participation remains low.....The small population of employees who participate in their employers’ health and wellness programs generally believe the programs have had a positive impact on their health.”



Friday Five: Top 5 healthcare business news items from the MCOL Weekend edition

Every business day, MCOL posts feature stories making news on the business of health care. Here are five we think are particularly important for this week:


Surgeons’ Opioid-Prescribing Habits Are Hard To Kick

As opioid addiction and deadly overdoses escalated into an epidemic across the U.S., thousands of surgeons continued to hand out far more pills than needed for postoperative pain relief, according to a KHN-Johns Hopkins analysis of Medicare data.

Kaiser Health News

Friday, June 21, 2019


Health Insurance Providers Launch Project Link to Address Social Barriers to Health

Not every health care problem can – or should – be addressed with a prescription pad. That’s why America’s Health Insurance Plans (AHIP) is launching Project Link – a new initiative that brings together the best thinking on how to effectively address social barriers to health and long-term well-being.


Thursday, June 20, 2019


1 In 6 Insured Hospital Patients Get A Surprise Bill For Out-Of-Network Care

About 1 in 6 Americans were surprised by a medical bill after treatment in a hospital in 2017 despite having insurance, according to a study published Thursday.

Kaiser Health News

Thursday, June 20, 2019


Private Medicare Advantage Could Hit 70% Market Share

Enrollment of seniors in private Medicare Advantage plans could reach 70% of those eligible for federal health benefits for the elderly between 2030 and 2040, a new report shows.


Tuesday, June 18, 2019


Trump says he will roll out new health care plan in next couple of months

President Trump said he'll be rolling out a new health care plan in a couple of months, saying it will be a key focus in his 2020 reelection campaign.

The Hill

Monday, June 17, 2019


These and more weekly news items on the business of healthcare are featured in the MCOL Weekend edition, along with the MCOL Tidbits, and more, for MCOL Premium level members.


Looking Back at Healthcare Headline news this week 20, 10 and 5 years ago

By Claire Thayer, June 14, 2019

The MCOL Weekend newsletter is a treasure trove of historical healthcare news, dating back over twenty years.  Here’s a look back on some of the top news items this week 20, 10 and 5 years ago: 


Health Care: Boehner proposes expanded coverage, June 10, 1999

U.S. Rep. John Boehner announced a proposal Wednesday to reform managed health care programs for most Americans through bills simultaneously introduced by several Republicans. Boehner said his plan seeks to make health plans more accountable to patients while expanding health insurance to most of the 43 million Americans now without coverage. After months of `bipartisan hearings,' on health care reform, no Democrats endorsed the Boehner program. 

Healthcare Industry Earnings Up 15.3% in 1st Quarter 1999, June 8, 1999

HealthCare Markets Group released today its first quarter 1999 analysis of the financial performance of publicly traded healthcare companies. First quarter 1998 Healthcare Industry adjusted earnings increased 15.3 percent, on 14 percent revenue growth. By way of comparison, fourth quarter 1998 Healthcare Industry adjusted earnings increased 21 percent, on 16.3 percent revenue growth, and third quarter 1998 Healthcare Industry adjusted earnings increased 14 percent over third quarter 1997, on a 14.3 percent increase in revenue.


Pfizer exec reinforces company's generic drug plan, June 10, 2009

The Associated Press reports that an executive at Pfizer Inc. said Wednesday the drug developer will focus on expanding its portfolio of generic drugs in order boost sales and build its position in that market.

Cigna's drug unit could fetch $1.3 billion-analyst, June 10, 2009

Reuters reports that Cigna Corp's pharmacy benefit unit could fetch $1.3 billion in a sale, an industry analyst said on Wednesday, as the health insurer's top executive reiterated the company is evaluating the business 


Mixed Bag for Health Co-Ops, June 12, 2014

The Wall Street Journal reports: Many of the nonprofit health-insurance cooperatives created by the Affordable Care Act have enrolled far fewer people than they had hoped, according to figures obtained by a Republican-led House committee, calling into question their viability. 

Hospitals Push Bundled Care as the Billing Plan of the Future, June 8, 2014

The Wall Street Journal reports: Hospital bills may soon get a lot simpler. Traditionally, hospitals have charged patients separately for every service and supply they use-as anybody who has waded through pages of charges knows.


Analyzing Blue Cross Blue Shield Plan Administrative Costs

By Clive Riddle, June 13, 2019

Sherlock Company in the June issue of their Plan Management Navigator examines administrative cost trends for Blue Cross Blue Shield Plans, analyzing year end 2018 vs 2017 data.  They found that costs “increased by 5.5% per member, up from an increase of 5.1% for 2017. Reweighting to eliminate the effects of product mix differences between the years, per member costs increased by 6.7% as compared with 5.9% in 2017. ASO/ASC increased as commercial insured membership declined. Medicare Advantage continued to grow rapidly.”

 Their key findings included:

  • Most clusters of expenses grew at rates less than last year.
  • Uniquely, Account and Membership Administration’s growth rate increased.
  • Growth in Information Systems was the single most important reason for administrative expense increase in 2018.
  • The shift in favor of products and market segments that are lower cost to administer muted the real growth.


Sherlock’s benchmarking study “analyzes in-depth surveys of 14 Blue Licensees serving 37 million members. Surveyed Plans comprise 52% of the members of Blue Cross Blue Shield Plans not served by publicly-traded companies.” 

Why does this benchmarking matter? Because the non-publicly traded BCBS plans provide a meaningful universe to benchmark, and plan administrative expenses are highly scrutinized, and certainly more controllable than medical expenses. As Doug Sherlock states, “in the current environment, optimizing administrative expenses is a high priority for health plan managers. Plans have completed their adaptation to the Affordable Care Act and the bulge in Exchange and Medicaid members. Plus, administrative expense visibility has been heightened by the rhetoric of presidential candidates.”

Here’s some key specific data from their report:


  • For the universe as a whole, the median total costs were $38.51 per member per month, higher than last year’s $34.99. 
  • By functional area, median pmpm costs were: Sales & Marketing $9.21; Medical & Provider Management $5.03; Account and Membership Administration $16.10 and Corporate Services $5.92
  • Median pmpm costs by product categories included: Commercial insured $49.84; Commercial ASO $28.32; Medicare Advantage $112.08; and Medicaid $46.08.
  • The median administrative expense ratio was 9.0% compared with 8.9% last year.
  • The median administrative expense ratio by product categories included: Commercial insured 10.8%; Commercial ASO 7.1%; Medicare Advantage 12.5%; and Medicaid 9.3%.
  • Staffing ratios increased by 6.8%, especially in Information Systems. 
  • Approximately 19 FTEs serve every 10,000 members in the commercial products. 
  • Compensation, including all benefits except OPEB, increased at a median rate of 3.8%. 
  • The median proportions of FTEs that were outsourced was 11.0%.
  • After the effect of the Miscellaneous Business Taxes, total administrative expense PMPM increased by 17.9% compared with a decline of 2.3% in the prior year 





Consumer Surveys on SDOH Experiences: Kaiser, McKinsey and Waystar

By Clive Riddle, June 7, 2019 

Kaiser Permanente has just released results of consumer SDOH survey they commissioned entitled Social Needs in America, which found “68% of Americans surveyed reported they experienced at least one unmet social need in the past year. More than a quarter of those surveyed [28%] said that an unmet social need was a barrier to health, with 21% prioritizing paying for food or rent over seeing a doctor or getting a medication.”  In two other recent consumer SDOH survey reports, one [Waystar] found the same exact percentage [68%] reporting one or more unmet needs, while the other [McKinsey] found a lower figure [53%.] 

Here’s some of the Kaiser survey’s other detailed findings:

Respondents that frequently or occasionally experience stress include:

  • 39%  over meeting their family’s needs for food/balanced meals;
  • 38% over social relationships needs;
  • 35% over meeting housing needs; and,
  • 32% over transportation needs

Respondents believe these factors are important to overall health:

  • stable housing (89%)
  • balanced meals (84%)
  • reliable transportation (80%); and
  • supportive social relationships (72%) 

35% lack confidence that they could identify the best resource if they or a family member needed to use community resources relating to transportation, food, housing, or social isolation. 

42% would turn to their medical services provider when looking for information on community resources to help with social needs, and 30% would turn to their health insurance provider for this information.

Respondents are supportive of medical service providers assessing social needs;

  • 93% say their medical provider should ask about access to
  • food and balanced meals;
  • 83% say their medical provider should ask about safe and stable housing;
  • 78% say their medical provider should ask about social relationships and
  • isolation; and
  • 77% feel that their medical provider  should ask about transportation to work, school, appointments, or activities

Mckinsey examined consumer interest in SDOH offerings and how SDOH impacted healthcare utilization rates in their 2019 Consumer Social Determinants of Health Survey report, released in April, which found 53% reported they were adversely impacted by at least one SDOH factor, with food security being the most commonly reported unmet need (35%), followed by safety (25%) housing (21%) social support (17%) and transportation (15%). McKinsey found that 45% of respondents with unmet social needs reported high healthcare utilization, compared to 21% of respondents reporting no unmet needs. 85% of respondents indicated they would use a social program offered by their health plan.

Waystar released results of their consumer SDOH survey in December, finding:

  • 68% of consumers have at least some level of SDoH challenge and 52% have a moderate to high SDoH risk in at least one category.
  • Patients with SDoH issues are 2.5 times more willing to talk about those issues with clinicians than they are with payers
  • Patients with high SDoH risk are more than 20 times more likely to miss a medical appointment at least once a month
  • Medicare and Medicaid, have the largest high-stress share with 33 percent having high stress in three or more areas, compared to 21 percent of the commercial insurance population being "high risk."

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