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Benefits July 19, 2000
BITTER PILL? – New Study Predicts Prescription Costs to Rise Sharply
July 19, 2000 (PLANSPONSOR.com) - Prescription drug
costs are expected to increase nearly 25%, and overall
medical costs 12.2% over the next year, but most large
employers plan to maintain their current proportion of
medical costs with active employees, according to a new study
by Watson Wyatt Worldwide and the Washington Business Group
on Health.
Reported by Nevin E. Adams
Want a New Drug
The study indicates that the cost of prescription drug benefits offered by large employers is expected to rise an average of 22.5% for active employees, and nearly a percentage point higher (23.4%) for Medicare retirees over the next year.
According to Rich Ostuw, global practice director of
group and health care consulting at Watson Wyatt.
“Prescription drug costs are continuing to escalate due to
introduction of expensive new medicines, the
aging of the population, and the aggressive
direct-to-consumer marketing that stimulates patient
demand.”
On the Rise
A 12.2% increase is anticipated for overall medical costs, with the largest increase coming from point of service programs (13.7%), followed closely by preferred provider organizations (PPOs) with a 13.3% rise.
HMOs are expected to jump 11.8%, while the average increase in dental benefits should total 7.6%.
Generally speaking, costs are about a percent higher for Medicare retirees across the board. However, HMO costs are anticipated to be 2% higher (13.8%) and dental more than 2% lower (5.5%).
Splitting the Difference
Despite the increased costs, only 12% of employers plan to shift a higher percentage of the cost to employees. Over half (57%) will maintain the current cost-sharing arrangements with employees, and nearly a third will absorb a disproportionate share of the cost increase, according to the survey.
The survey was based on responses from 61 companies covering 1.7 million employees.
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