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Health Plans' Drug Costs Predicted to Rise 20%

Kate Traynor

A new report predicts that double-digit inflation in prescription-drug costs will continue to be a major factor influencing health-plan costs next year.

According to the 2001 Segal Health Plan Cost Trend Survey, health plans' prescription-drug costs for beneficiaries under age 65 will increase 19.7 percent next year, while costs for seniors will rise 20.9 percent. Also, payments for prescription-drug claims could climb to 15 percent of a health plan's expenses—a 50 percent increase since 1995 and twice the increase for all other medical services. Nearly half of the new expense will come from increases in the average cost of a prescription.

Overall costs for claims at all types of health plans are predicted by the report to increase between 9.9 percent and 15.1 percent, with traditional indemnity plans expected to have the largest increase and health maintenance organizations (HMOs) the smallest. The predicted 2001 rate of increase for HMOs is twice as high as the rate documented for 1998, a finding that could erode much of the cost-containment advantage HMOs have traditionally held over other types of health plans, the report noted.

Predictions for the analysis were based on claims data from 45 health care organizations. The analysis included data from both pharmacy benefit management companies and medical plans that manage their own prescription-drug coverage.

The Segal report, which was issued last month, focused on changes to per capita claims costs and did not address other factors that might influence costs to health plans and plan sponsors.