Analysts Say Health Care, Prescription Drug Costs Driven By Consumer Demand; Expect Costs to Shift To Employees

Efforts to control health care costs have taken a "back seat" to demand for more "freedom and choice," health policy analysts said at a July 12 roundtable discussion hosted by the Center for Studying Health System Change. At the sixth annual discussion, titled "Wall Street Comes to Washington: Market Watchers and Policy Analyst Evaluate the Health Care System," panelists agreed that "declining corporate profits" will force employers to shift more health care costs to workers. Norman Fidel, senior vice president at Alliance Capital Management, said that employers will not "remain competitive" if they continue to "absorb" premium increases of 13% to 15% each year, adding, "[T]he only solution is to put costs on the consumer." Panelists also said the "landscape" of the health care industry has "changed dramatically" over the past five years: providers, particularly prominent hospital systems, have gained "bargaining clout" with health plans and are "at each others' throats." Panelists predicted that health plans will shift from "restrictive care management practices" and invest in technology to analyze "physician and hospital practice patterns" to control costs through quality incentives. "Substantial gaps" exist between "what is done in the marketplace by practicing physicians and what we know from evidence-based medicine to be more appropriate ... the extent that managed care companies can identify those gaps and help close those gaps through quality incentives ... can have a very positive impact on costs over an extended period of time," Merrill Lynch Managing Director Roberta Walter Goodman said (HSC release, 7/12). A kaisernetwork.org Webcast of the roundtable discussion is available online.

Consumer Demand Also Drives Drug Costs
Consumer demand is also "ballooning" prescription drug costs, as patients "rush" to use new medications, a University of Michigan study found. Appearing in the July issue of the American Journal of Managed Care, the findings are based on the prescription drug use between 1996 and 1998 of 120,000 employees -- both hourly and salaried workers -- at an undisclosed manufacturing company. The Michigan study found that growth rates in medication costs ranged from 17% in a traditional fee-for-service plan to 35% in an HMO during the study period -- a rate more than "double the overall rate of increase in medical spending." The study concluded the "dramatic rise" in the number of prescriptions used, particularly new medications, was "responsible for the vast majority of cost increases." The Detroit News reports that while many experts have "blamed" prescription drug cost increases on direct-to-consumer advertising, the study did not examine the issue (Webster, Detroit News, 7/13).