Prominent Survey Suggests:
Health Care Costs to Slow Rate of Increase
“The new data is encouraging,” says LIUNA General Secretary Treasurer, New England Regional Manager and LHSFNA Labor Co-Chairman Armand E. Sabitoni, referring to the 2007 Segal Health Plan Cost Trend Survey. “Health care costs are still rising at double-digit rates, but the rate of increase has declined, especially in the area of prescription drug costs.”
The Segal Survey is published annually and forecasts trends in claims cost before changes in plan design or participant contributions are factored in. It is derived from reports and projections obtained from insurance carriers, managed care organizations, third party administrators (TPAs) and pharmacy benefits managers (PBMs).
In general, all categories of health care costs – inpatient, outpatient and drugs – are expected to rise in 2007 by more than twice the rate of inflation (which was about 4.1 percent in July). Because real average weekly earnings in the U.S. also rose about 4.1 percent (in July), the data suggest that the double-digit projection of increased health care costs represents one of the most serious obstacles to an across-the-board increase in the American standard of living.
The good news in the report, however, is the indication of progress in curtailing the rate of increase in prescription drug costs. For the first time in several years, drug costs are expected to rise at about the same rate as other health care costs. In the recent past, these drug costs have been rising almost twice as fast as other costs.
Much of the improvement in the drug cost trend can be traced to the increased use of generic medicine, both at retail outlets and through mail order purchases. In part, this is due to the availability of more medicines in generic form. It also results from successful efforts by health plans, TPAs and PBMs to encourage doctors and patients to use generics.
“While these data are national and general in nature,” says Sabitoni, “LIUNA members and our health and welfare funds appear to be part of the trend toward wider generic utilization. We see the evidence in the increased use of LaboreRx and the reports on increased generic use coming from our PBM (see Is Your Drug Program Up-to-Date?).”
However, while expanded utilization of generic medicine is a strong step in the right direction, Laborers can take other actions as well to help contain rising health care costs. “The battle to reduce all health care costs,” says Sabitoni, “remains critical to our nation, our union, our signatory employers and our members. The fact that total health costs continue to rise faster than average earnings is evidence that the health care market now compels workers to forego wage increases in order to sustain their health care. Laborers and their family members can help reduce these pressures by improving their general health through good diets and improved exercise, becoming more conscientious health care consumers, avoiding unnecessary trips to the emergency room and working safely on the job.”
While Laborers and their family members do their part, LIUNA’s health and welfare funds also have an important role to play in health care cost containment. Maintaining an up-to-date prescription drug program and encouraging generic use is one piece. Others include promoting wellness among fund participants, joining local health care cost coalitions to negotiate better rates and finding ways to weed out wasteful, expensive and ineffective health care providers.
“Soaring health care costs are a national catastrophe,” says Sabitoni, “but until political solutions are found, we have to rely on ourselves and our own organizations.”