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Report Predicts Health Care Cost Trends Will Level Off

July 28, 2008
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The growth in health care costs paid by employers is expected to level off in 2009 after five years of deceleration, a report from PricewaterhouseCoopers’ Health Research Institute predicts.

Based on a survey of more than 500 employer and health plans providing coverage to 11 million lives, New York-based PricewaterhouseCoopers found that medical costs will increase by 9.6 percent on average next year, compared with an average of 9.9 percent this year.

Improved medical management and a focus on prevention and wellness are among the tools that employers are using to slow down the growth in health care costs, according to the report, “Behind the Numbers: Medical Cost Trends for 2009,” which was released Thursday, July 24.

Two-thirds of employers contract with disease management programs that focus on reducing and eliminating hospitalization, the report found. In addition, two-thirds of employers have adopted wellness programs, nearly half of which say they are somewhat effective at reducing costs.

Generic substitution of prescription drugs also continues to reduce health care costs for employers, according to the PricewaterhouseCoopers report. However, this benefit is likely to diminish, since fewer brand-name drugs are going off patent in 2009, the researchers said.

Although the rate of increase in health care costs is being tempered somewhat, PricewaterhouseCoopers found that two major factors continue to contribute to employers’ growing medical tab: new construction in the health care industry and cost-shifting from the uninsured.

In particular, the health care industry is in an era of booming construction in response to increasing consumer demand, PricewaterhouseCoopers reported. Moreover, if there is a recession in 2009, the health care industry could grow even more. During previous recessionary periods, health care has increased its portion of the gross domestic product and medical prices have risen faster than other prices, PricewaterhouseCoopers said.

In addition, one of every four dollars spent by private payers is making up for decreasing government financing to Medicare and Medicaid, the report found.

A copy of the complete report can be found at www.pwc.com.

Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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