Health Costs Rising Again: Greater Use of Prescription Drugs is a Major Factor
Health care costs, which were relatively stable in recent years, are
on the rise again. According to a report by the Health Care Financing
Administration (HCFA), the country’s annual health care spending
will top $2.1 trillion by 2008, doubling what it was in 1997.
The report says the slow growth in health care costs during recent years
was largely due to savings generated from consumers moving into managed
care plans. That migration is mostly over. More than 160 million Americans
are now covered by managed care plans, up from about 60 million in 1990.
What this means is that the easy way to achieve savings has been utilized.
Additional savings will require tougher decisions.
Prescription drugs play role
Expenditures on prescription drugs are the fastest-growing segment of
health care costs. In 1980, the United States spent $12 billion on prescription
drugs. By 1999, we were spending an estimated $100 billion annually.
Why the rise in costs? Quite simply, Americans are using more prescription
drugs. There are several reasons for this increase. First, the advancing
age of the U.S. population plays a role. One in eight Americans is 65
or older, but this group accounts for one-third of all drug purchases.
Second, the demand for prescription drugs has increased. In 1999 alone,
drug companies spent an estimated $1.8 billion advertising their products
directly to consumers. Drug companies also target physicians, spending
between $8,000 and $13,000 annually on each physician, according to the
Journal of the American Medical Association.
Third, there are new medications for disorders that previously could
not be treated, and these new medications are very expensive.
Beyond managed care
Many employers across the country are likely to begin taking steps to
counteract rising health care costs. Most may start by dealing with prescription
drug costs.
Many employers may wish to change their drug coverage by increasing employee
drug co-payments or by implementing new cost-sharing arrangements. In
one arrangement, participants would pay the least for a generic drug,
more for a brand name on an approved list of medications, and the most
for a brand name not on the list.
Employers may also look toward health promotion and wellness programs,
which are getting renewed interest. According to the Wellness Council
of America, preventable illnesses make up 70% of health care costs in
the United States. The success of wellness programs is hard to quantify
and varies. However, some published articles report savings of as much
as $5 for every dollar invested in a wellness program.
Posted May 26, 2000