Increase expected in prescription costs

The cost of prescription drug benefits offered by large employers is expected to increase an average of 22.5% for active employees and 23.4% for Medicare retirees during 2001, according to a new survey by Watson Wyatt Worldwide and the Washington Business Group on Health.

Responses from 61 companies covering 1.7 million employees indicate that overall medical costs are expected to increase an average of 12.2% for active employees and 13.3% for Medicare retirees. Those figures show a dramatic rise over the 8.1% increase for active employees and 9.6% increase for Medicare retirees this year. This marks the fourth year in a row that health care costs have accelerated, according to the report.

"While managed care was initially successful in bringing down health care costs and rates of increase, it appears that they have been less effective in containing the rate of increase," says Rich Ostus, global practice director of group and health care consulting at Watson Wyatt.

He cites the introduction of new medicines, the aging of the population, and the aggressive direct-to-consumer marketing by drug companies as reasons for the continuing escalation of prescription costs.

According to the survey, only 12% of employers plan to increase employee contributions to cover the increased costs.