Healthcare costs are up. Here are the culprits.
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The latest statistics show 44 million Americans are not covered by any health insurance. This number is likely to increase as costs rise further.Skip to next paragraph
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Higher costs discourage employers, especially small businesses, from providing health benefits to employees. And since employers are already boosting the cost to employees of health benefits, fewer workers will enroll in their firms' health plans.
In smaller companies, only 48 percent of employees elect family coverage, down from 51 percent in 2002. The $359 average monthly bill for HMO coverage is just too much for many, and it's getting worse.
The Mercer survey found that employee contributions, especially for family coverage, rose sharply in 2003. In the three previous years, employers had passed on to employees only a portion of cost increases. This year, "employers took back the lost ground," says Mercer consultant Blaine Bos.
Critics say the new Medicare drug benefit will tempt more companies to drop their coverage of retirees, despite new subsidies to encourage continuation. The benefit, though primarily shifting drug costs from individuals to the federal government, is expected to add to overall drug consumption.
The cost of bringing a single new drug to market has risen to about $1.7 billion, calculates Bain & Co., a Boston consulting firm. That's up from $1.1 billion from 1995 to 2000. These totals involve commercialization costs, such as preparing marketing materials.
Drug companies defend their marketing expenses as educational, saying doctors have little spare time to inform themselves of the latest advances.
But "nobody wants to be educated by somebody who wants to sell them something," says Arthur Caplan, a bioethicist at the University of Pennsylvania. He calls the seminars "small-scale bribery."
What's to be done about rising medical costs? Here are some suggestions by experts, not all politically easy to obtain:
• Provide more information to consumers on what drug works, what procedures are best, which hospitals and physicians have good records. Insurance, for instance, shouldn't cover extra costs if a patient uses a brand-name drug when a cheaper generic does the job.
• Cut off expensive treatment if it extends someone's life only a few days or months.
• Spend more on prevention of disease by encouraging better lifestyles, improved nutrition, and other steps.
• Ban or control the advertising of prescription drugs to consumers. The "hype" in the ads that pepper the evening news and other programs has swelled drug sales and taken up physicians' time, suggests Mr. Caplan. But there is little indication that the extra drug consumption has improved health by much.
• Cap malpractice awards so doctors need not prescribe so many tests and other defensive practices.
• Let HMOs and other healthcare providers return to tighter management of costs, procedures that worked in the 1990s but were abandoned after severe criticism by customers and the press.