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Medical costs to rise?
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June 16, 1998: 3:16 p.m. ET
Aging population, drug breakthroughs expected to boost insurance rates
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NEW YORK (CNNfn) -The managed care revolution has ensured that healthcare costs have barely budged for several years, but analysts say that consumers should get ready for that to change in 1999.
"We simply can't discount the cost anymore. We simply can't get people out of the hospital faster unless we put them on roller skates," said Randall Abbott, healthcare consultant at Watson Wyatt Worldwide [91 Kb WAV] [91 Kb AIFF]. "One of two things is going to happen -- employees are going to have to pay more or their benefits are going to have to change."
According to projections from Watson Wyatt Worldwide, costs for membership in traditional indemnity health plans will rise the most next year, up 12 to 15 percent on average.
Fees for preferred provider and point-of-service plans will increase between 7 and 11 percent, while membership costs in health maintenance organizations (HMOs) will rise 5 to 7 percent.
In particular, prescription drug prices may rise as much as 15 to 22 percent because of Viagra and other costly breakthroughs in the pharmaceutical industry.
"What is happening is you might have had a $5 co-pay for a generic drug and a $10 or $15 co-pay for brand names," said Henry Moyer, healthcare consultant at Hirschfeld, Stern, Moyer & Ross. "And now, with these costs, the company may change it. So let's say a $7 or $10 co-pay for a generic and $15 or $20 co-pay for a brand drug."
Industry watchers attribute the price pressures to a number of factors. Insurers are coping with an industry-wide wave of expensive merger activity. Meanwhile, doctors and hospitals are chafing under long stagnant fees, but costs have already been cut so deeply that barely half of all HMOs managed to make money last year.
Most fundamentally, the American people themselves require more healthcare than they used to, and that trend is expected to continue.
"The bottom line is America is aging," Abbott said. "Aging people need more care. The American consumer is better educated. We are demanding more technology. We are demanding more pharmaceuticals to make our lives better. And, as a result, it is going to cost more. Somebody has to pay." 
-- by staff writer Diane Galligan
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