Healthcare Cost Increases Outpace Inflation

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The 32nd National Healthcare Trend Survey from Xerox HR Services reveals that while increases in healthcare costs are slowing, they continue to outpace inflation by a wide margin.

Since the most recent recession, the annual projected increase in healthcare costs has eased from 11.6% in 2010 to 8% in 2016.

During the same period, the United States Bureau of Labor Statistics stated inflation rate in the U.S. has been 1.4%, according to a press release from Xerox.

As the release notes, reasons why medical cost trends are still higher than inflation include:

  • Use of diagnostic tests and treatments;
  • Limited reimbursement to providers from Medicare and Medicaid;
  • Mandated coverage of certain benefits, such as expanded mental health benefits and prosthetic legislation;
  • Increased administrative costs associated with new regulations; and
  • Up-front costs associated with new medical technology and treatments.

Cost of Prescription Drugs

The pace of prescription drug costs is not lessening; with the projected rate of increase rising from 6.7% in 2010 to a current 8.8%.

Survey respondents cite three key reasons for the rise:

  1. the continued impact of specialty drugs, where, as an example, treatment for multiple sclerosis can cost more than $50,000 a year;
  2. an increase in the number and use of pharmaceutical products that improve the quality of life and/or enhance lifestyles; and
  3. a dramatic increase in the number and expense of compounded pharmaceuticals.
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