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    State of the Industry 2013: Spending Growth

    National healthcare spending will grow 4.2% in 2012 then dip to 3.8% in 2013, according to recently released estimates from the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS). The slowdown is in part caused by slower economic growth.

    Overall, CMS projections are only slightly higher than the historically low growth rate of 3.8% in 2009. Spending growth is expected to jump to 7.4% in 2014 as health exchanges, individual coverage requirements and Medicaid expansion are phased in through the Patient Protection and Affordable Care Act (PPACA).

    MHE readers generally predicted a higher growth for this year—most aiming for the 6% to 8% range—which is similar to what they anticipated in the survey last year.

    Don Hall, Delta Sigma LLC
    For health plans specifically, next year's expenditures and revenues are expected to be influenced directly by a number of factors including program innovation, says Don Hall, MHE editorial advisor and principal, Delta Sigma LLC, in Littleton, Colo.

    The mandated medical loss ratio refunds this year should have a direct affect on 2013 premium revenue, he says. This year, insurance companies were forced to refund $1.1 billion to about 12.8 million Americans.

    Predicted Spending Increases: Current year over previous year
    "Insurers don't want to do that next year because they're perceived as overcharging when they send refunds," Hall says. "What we're seeing is a number of companies are lowering their premiums proactively. There's going to be a negative trend in some of the policies reflecting this pricing perspective."

    Optimal pricing of policies will remain a challenge. Innovations are poised to drive down plan expenditures as plans engineer programs to improve operational efficiencies.

    The plethora of proposals submitted for CMS's Health Innovation Awards illustrate the direction throughout the industry, Hall says. Many approved projects, for example, promote early intervention to stave off high cost treatments and increased utilization. For example, $26 million was awarded to Dartmouth College—in collaboration with 15 large U.S. health systems—to hire "patient and family activators" to better engage patients in their care and then use the data to create outcomes measurements for patient-family engagement. The program is projected to save $63.7 million over three years.

    Plans are forecast to whittle down expenditures as they continue to forge partnerships with providers and support interactive tools to promote patient engagement and care coordination.

    In the long run, Hall believes that such innovation—along with PPACA provisions—can have a dramatic impact on the cost and quality of healthcare in the United States.