When it comes to providing health care benefits, quality is always the most important consideration, but costs are never very far from the minds of employers. Managed care has been successful in containing medical inflation but most businesses still face yearly increases in health outlays.
The rising cost of health care is fueled largely by soaring prescription drug benefit expenditures. Prescription drug costs are rising 15 percent to 20 percent a year, with double digit annual increases likely to continue. Large companies expect the cost of their prescription drug benefits to jump 22 percent in 2001, according to a recent survey. Prescription drugs now typically account for about 15 percent of an employer's health care costs, up from roughly 5 percent in the mid-1980s.
There are several reasons why employers are paying more today for drug coverage:
- Increased use of prescription drugs, particularly by seniors.
- The replacement of older, less expensive drugs with newer, costlier ones.
- Increased consumer demand driven partly by aggressive drug company advertising efforts.
- Yearly price increases for many medications.
- Introduction of new lifestyle drugs such as Viagra.
Of course, the appropriate use of new medications can go a long way in helping employees live healthier and more productive lives, while also helping to reduce costs in other parts of the health care system. For example, using the correct medication under a doctor's care may, in some instances,enable treatment of serious illnesses outside the hospital setting.
Employ proactive strategies to reduce costs
Employers and health insurers who pay most of the pharmacy bills are concerned about how to control pharmacy expenditures.
Increasingly, Ohio employers and insurers are implementing an array of cost management measures that include sharing costs with employees, encouraging the use of generic substitutes for brand name drugs, promoting mail-order pharmacies and working with physicians to improve prescribing patterns.
The goal of these strategies is not to restrict employee choice in obtaining medications, but rather to offer access to clinically safe and appropriate medications through cost-effective benefit plans. Plan design changes that encourage cost-conscious consumer behavior are an effective way to curb pharmacy costs.
Surprisingly, employee co-payments have remained relatively flat while drug costs have surged in recent years. In fact, over the past decade, employees' share of the pharmacy benefit has declined to just 17 percent.
Consider new systems of co-payment
Traditionally, many Ohio employers have used a two-tier pharmacy co-payment plan: Employees pay $5 when ordering generic prescription drugs and $10 for brand-name drugs.
But more businesses are moving to three-tier co-payment plans that give workers a greater incentive to ask for generic drugs. Generics, on average, are about one-fifth the cost of brand-name medications.
Under a three-tier system, patients pay the lowest co-payment for generic drugs, a higher co-payment for "preferred" brand-name drugs, and the highest price for "nonpreferred" brand-name drugs. Health insurers typically classify as "preferred" those medications shown by clinical studies to be safe and effective. Thus, an employee with a three-tier plan might pay $5 for a generic drug, $15 for a preferred brand-name drug, and $35 for nonpreferred brand-name drugs.
Another cost-effective plan design is the closed formulary. Unlike three-tier plans, in which virtually all drugs are available, closed formulary plans offer a limited set of medications in each class of drugs.
Economies of scale can also be achieved by encouraging employees to fill long-term prescriptions via mail order programs. Increasingly, employees can conveniently order these medications over the Internet. Jannifer Harper, M.D., is Midwest Regional Medical Director of CIGNA HealthCare. She is based in Cleveland. Contact CIGNA at (800) 541-7526.
Tackling rising expenditures
As health care costs skyrocket for employers, what's behind the increases? And, more important, what can employers do to stave off future increases?
Here are some answers:
- Soaring prescription drug costs are fueling recent increases in employers' health care benefit expenditures.
- Working with health insurers, employers are making benefit design changes to hold down costs.
- Cost-saving strategies include promoting the use of generic drugs, increasing employee co-payments for nongenerics and using mail order pharmacy services.
- Consider a three-tier co-payment system for prescription drugs.
Remember that scene in the movie As Good as It Gets, where the harried young mother complains she has to take her asthmatic son to the emergency room because her HMO wouldnt let him see a specialist? Like much of what comes out of Hollywood, the scene was entertaining, but not based in reality.
Contrary to the HMOs-as-bean-counters image typically portrayed by movies and TV shows, the basic premise of managed care is to give patients the right care, at the right time, in the right setting. Through new approaches to delivering care, such as medical care management, health plans strive to keep employees healthier and to help those with asthma and other chronic conditions manage their illnesses so they can avoid time-consuming, costly visits to the hospital.
Medical care management is a quality initiative which combines preventive medicine, early detection of disease and coordinated treatment processes. Thanks to recent advances in information technology, health plans can now collect and analyze claims and other data to determine who is suffering from a chronic condition or may be at risk for a particular illness. Armed with that data, health plans then work with employers to design appropriate preventive measures and clinical interventions.
For instance, asthmatic patients may be trained to avoid asthmatic attacks, monitor their breathing, and use their medications wisely. Nurse case managers would follow up as appropriate to monitor treatment and reinforce patient education, as well as coordinate care with physicians. Physicians and nurses are also educated on cutting-edge ways to prevent and control asthma.
Care management programs focus on the major cost drivers in the medical delivery system, such as diabetes, asthma, low back pain, cardiovascular diseases and hypertension. Chronic conditions such as these, which collectively account for about 60 percent of medical costs in the United States, exact a heavy toll on employers through time lost from work, reduced productivity and higher insurance premiums.
Low back pain, for instance, is second only to the common cold as the most frequent cause of work absenteeism, and is the fifth most common reason for a physician visit. Asthma, a chronic inflammatory disease that afflicts roughly 15 million Americans, causes more than 1.5 million days of lost productivity annually. It is estimated that per capita health costs are three-and-a-half times higher for diabetics than for those who do not have the disease.
Although still in its early stages, care management has already shown great promise for improved prevention and patient self-care, fewer hospitalizations and shorter lengths of stay for sick employees and lower costs for employers.
Jannifer Harper is medical director of CIGNA HealthCare of Ohio.
Making a difference
Through care management programs, health plans have implemented new research findings and emerging scientific evidence to care for costly chronic conditions. Preliminary indications are that these programs result in better medical outcomes, improved quality of life and reduced employer costs.
- CIGNAs Lovelace Health Systems in New Mexico has experienced an 83 percent decline in lost school, day care and work days among children with asthma and their parents.
- In Memphis, CIGNAs low back pain care management program resulted in 17 percent fewer hospitalizations and a 16 percent decrease in emergency room visits. Employers medical costs for low back pain also declined 16 percent.
Chronic conditions in particular, such as diabetes, low-back pain and asthma, take their toll on businesses through frequent absences, lower productivity and higher health insurance premiums.
In Ohio, diabetes triggers enormous social and economic costs. Statewide in 1996, diabetes led to more than 11,000 deaths, nearly 3,000 amputations and close to 150,000 hospitalizations. Diabetes-related medical costs and lost productivity costs in Ohio totaled about $5 billion that year.
Low-back problems affect virtually everyone at some time during their life. Surveys indicate that one-half of working-age adults have back symptoms each year. Next to the common cold, low-back problems are the most common cause of work absenteeism in the U.S. and the most common reason for filing workers' compensation claims. Nationally, the financial toll on businesses ranges from $50 billion to $100 billion.
Back problems also affect co-workers, who must take on the disabled employee's workload. Although the causes of low-back pain are usually not serious, the discomfort can affect emotions, lifestyle and job performance.
Recognizing the challenges of low-back pain and other high-cost conditions, health insurers are responding by offering employers a new initiative known as care management. Care management programs seek to help patients better manage their conditions; reduce disease-related complications; better comply with their physicians' recommendations; and improve their quality of life. Keeping employers' health care costs affordable is another goal.
Under a low-back pain care management program, employees are identified to participate based on their claims history. Low-back programs emphasize basic patient education. Research shows that when patients better understand their illness, they tend to take better care of themselves and avoid behavior that could increase the risk of back injury.
Once identified, employees are asked to fill out a questionnaire about how their back pain affects their lifestyle. Answers are forwarded to the employees' primary care physicians on a confidential basis to help guide discussions at physician office visits.
Participants receive a guide that helps them understand the causes of low-back pain and how to prevent it. It offers tips about proper lifting, bending and sitting techniques; simple exercises for strengthening the lower back and maintaining flexibility; ideas for making one's home and workplace more safe and comfortable; and suggested lifestyle changes that can improve one's back health.
Participants also receive a video which answers frequently asked questions and explores the latest treatment options. The video offers tips on how to talk to your doctor and provides resources for additional information. Toll-free information lines are available for employees to speak to a nurse or listen to tapes about back pain.
Care management programs seek to support physicians' patient education efforts and help them achieve clinical excellence in treating patients. Physicians receive care guidelines -- prepared by the nation's leading medical authorities -- on the treatment of back problems. The programs are not intended to be a substitute for physicians' judgment or experience.
Care management programs are yielding measurable dividends. In one CIGNA pilot program, low-back pain-related hospitalizations decreased 17 percent and emergency room visits dropped by 16 percent in one year. Additionally, employers' medical costs for low back pain declined 16 percent during that period. Although still in its early stages, care management shows great promise for keeping employees healthier, reducing disease-related absences from work, and containing employers' health care costs. Jannifer Harper, M.D., is medical director of CIGNA HealthCare of Ohio.
Still not convinced a healthier workplace can help your company's bottom line? Consider these facts:
- Low-back pain, diabetes and other chronic illnesses take an enormous toll through employee discomfort, absences at work and high health care costs.
- Care management programs, offered by insurers to employers, identify employees with high-cost chronic conditions, promote prevention and offer appropriate medical care.
- Program participants receive educational materials to help them better understand their condition and take better care of themselves.
- These programs seek to reduce disease-related complications, decrease absences at work, improve patients' quality of life, and contain employers' health care costs.