From 1960 to 2002, employer spending on health benefits increased threefold, according to the Employee Benefit Research Institute.

"From one year to the next, healthcare costs for employers and their workers always go up," a recent survey from PricewaterhouseCoopers Health Research Institute points out. "Yet, for the past five years, there's been some positive news. The growth rate has been dropping."

In 2009, according to last month's PricewaterhouseCoopers report, the growth in health care costs paid by employers in the private sector is expected to level off after five years of deceleration.

Based on a survey of more than 500 employers and provider-based health plans covering more than 11 million people, PricewaterhouseCoopers now expects costs to grow 9.6 percent in 2009 compared with 9.9 percent in 2008.

The key factors that are expected to slow down the growth are improved medical management of high-cost patients and generic substitution, according to the report, titled Behind the Numbers: Medical Cost Trends for 2009.

Focus both on prevention management and on wellness are among the medical management tools that employers are using to help temper costs next year.

Two-thirds of employers say they contract with disease management programs that focus on reducing and eliminating hospitalizations. "For example, the number of cardiac procedures has been dropping largely due to improved adherence to medications and more coordinated discharge planning," the report has found.

Moreover, two-thirds of employers are using wellness programs, with nearly half saying they are somewhat effective at reducing costs. These programs aren't merely a cost reduction, however, as employers told PricewaterhouseCoopers that these initiatives were "nearly effective at boosting productivity, improving employee loyalty and demonstrating corporate responsibility."

Generic substitution of prescription drugs also continues to reduce employers' health care costs, according to PricewaterhouseCoopers. This benefit is likely to diminish, though, because fewer brand-name drugs are going off patent in 2009, the researchers report. As as 2003, prescription drugs accounted for 11 percent of the total American health care spending, according to the Kaiser Family Foundation.

Although the rate of growth in health care costs is expected to level off next year, PricewaterhouseCoopers has found that two major factors continue to contribute to employers' growing medical expenses.

Cost-shifting from the uninsured, Medicare and Medicaid to private payers continues to increase and will account for nearly $1 in every $4 spent by private payers on hospital services next year. This, in addition to the construction costs involved in the health care industry's booming replacement of facilities, is among the major accelerators of cost growth in 2009.

There are more than 48 million Americans without health insurance and approximately 32 million others who are under-insured, IMT reported last year. If the economy continues its downturn and there is a recession in 2009, the economy will likely depend even more on the health industry.

During past recessions, health care has increased its portion of gross domestic product and medical prices have risen faster than other prices, PricewaterhouseCoopers reports.

Resource

Behind the Numbers: Medical Cost Trends for 2009
PricewaterhouseCoopers Health Research Institute, July 24, 2008

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