While the 5.8% is a bit higher than we’ve seen of late, it is a heckuva lot lower than the average for the last three decades.
Currently health care is responsible for 17.4% of US GDP; if the inflation rate prediction holds true and other economic sectors also grow as projected, health care will account for one out of every five dollars in ten years (19.6% to be precise).
We do know that the prediction will prove to be somewhat wrong, and economic growth for the next quarter is hard enough to predict, making a ten-year projection the proverbial dartboard in a dark room. So, what’s with the discrepancy between predictions?
The actuaries responsible for the 5.8% figure believe the soft economy over the last few years has been the primary driver of low health care cost inflation. Their thinking is that now the the economy is back to steady and significant growth, demand and prices will both heat up.
The counter-argument attributes the recent happy days of low medical cost inflation to structural changes in the health care delivery system. Their view is these changes, while overwhelmed somewhat by the big increase in the insured population due to PPACA, will help keep cost growth low as they become increasingly commonplace.
At this point, we just don’t know; there is anecdotal evidence that medical homes work and don’t; that ACOs are a success and a failure; that behavioral changes are working and are non-existent. That is far from surprising; we are still pretty early into this process, a process which is massively changing almost one-fifth of our nation’s economy.
What does this mean for you?
The key message is costs will continue to increase, with health insurance cost increases somewhat mitigated by higher deductibles and copays.
What’s also very clear is the health plans that are able to deliver lower costs and sufficient outcomes will do very well.