Health care costs ‘tug-o-war’

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American workers — fearful of losing their jobs — are driving up health care costs.

A study by PriceWaterhouseCoopers predicts a 9 percent increase in health care costs nationally during 2010, slightly less than the 9.2 percent increase during 2009 and the 9.9 percent during 2008.

Despite the recent economic contraction, health care costs continue to outstrip both inflation and wage increases.

“People are using their health insurance now, because they think they might lose their jobs later,” said Steve Berkshire, professor of health administration at Central Michigan University. “And people who have already lost their jobs are putting things off for too long — and something that could be done cheaper if caught early, is very expensive later on.”

Rising unemployment also is resulting in an increase in the uninsured and underinsured population, a drop in membership in commercial health plans and a higher percentage of the population covered by Medicaid — all of which drive up costs.

During the last five years, health insurance premiums increased four times faster than wages — a trend that is expected to continue. With corporate profits down during 2009, employers say they will push more health care costs to their workers, while expecting greater responsibility from workers for managing their personal health.

Other highlights from the report:

42 percent of employers say they will increase employees’ share of health care costs.

41 percent said they expect to increase medical cost-sharing through plan design changes.

More than two-thirds of employers are offering wellness and disease management programs.

But it isn’t all about rising costs — there is a “tug of war” going on between upward and downward costs, said Jack Rodgers, managing director in the health policy economics group of PricewaterhouseCoopers.

“Health care organizations are finding their revenue falling and are trying to increase prices,” he said. “However, with most prices holding steady or falling, health plans will put pressure on providers to hold the line on medical costs.”

Even as costs for health insurance rise, some factors are putting downward pressure on spending.

Generic drugs are reducing the growth in spending for prescription medication.

During 2010, five more “blockbuster drugs” — expensive drugs for chronic diseases — will go off patent, and the number of patent expirations will increase during 2011 and 2012.

Wellness programs are another way to reduce costs, but participation among employees is only at 40 percent for wellness and 15 percent for disease management programs.

High deductible health insurance plans — in which consumers bear a large portion of the up-front costs — also are driving down prices.

“A growing number of American workers are now in high-deductible plans, which are expected to lower utilization of health services, partly because greater awareness of medical costs could reduce demand for medical care — but partly because cash-strapped workers lack the resources to pay for medical procedures,” Berkshire said.

According to the study, 20 percent of employers plan to add a high-deductible health plan during the next two years.

But the plans might lead people to put off health care, Berkshire said. Hospitals are seeing a rise in uncompensated care because many people cannot afford high deductibles — sometimes as much as $5,000 — to receive care.

President Barack Obama’s health care plan could drive costs down — but only temporarily, Berkshire said.

“The plan cuts Medicare costs, as you know,” he said. “The cost of providing the care doesn’t go down, just the reimbursement rates. So that’s going to be passed along to private insurers. The rise in costs might go down temporarily, but is going to go even higher in the long-term.”

Amy Gillentine covers health care for the Colorado Springs Business Journal.