People interested in healthcare policy or insurance may remember this title from the late Uwe Reinhardt, a Princeton professor in Economy and expert in healthcare policy: ”it’s the prices, stupid!”, in reference to Bill Clinton’s campaign slogan: “it’s the economy, stupid!”. It was published almost 2 decades ago (2003), and is still unfortunately true today, as shown in the charts below.
We begin with an excerpt of the last edition of the KFF’s (Kaiser Family Foundation) 2021 Employer Benefits survey, showing that family medical insurance premiums nearly tripled between 1999 and 2021.
The second chart is about the evolution of hospital prices. Data from the United States Bureau of Labor Statistics reveals a threefold increase in both inpatient and outpatient hospital service prices between 1999 and 2018.
This means that if a specific hospital service price was $100 in 1999, that same service costs $300 in 2018 (see blue and red lines).
This strong correlation between the two indices comes with no surprise since Hospital care represents nearly 50% of the total healthcare costs in a given year.
Pharmacy, the second most important item in the total healthcare spending, represents now between 20 and 30% of that cost.
- A combined set of data comparing pharmaceutical prices in the USA, Finland and France for the period 2002 to 2010 shows a steady annual growth rate in the USA of between 2 and 6%, whereas prices in France and Finland were constantly declining.
2. This graph from Mercer, a national health brokerage network, provides the prescription drug cost for the 2011-2020 period. It shows that the compounded growth rate amounts to 85% over ten years.
Assuming a modest 3% average price increase for the 2001 to 2010 period, the result is a combined 250% growth of the prescription drug prices during the last 20 years!
Another clear indicator of the US outstandingly high drug prices is a 2019 study produced by the House Ways and Means committee titled “a painful pill to swallow”. US drug prices, compared to other developed countries, appear to be 3 to 6 times higher!
The conclusion to draw is unambiguous: it is the prices that explain the constantly and rapidly growing US healthcare costs.
This economic reality translates into another healthcare issue, a “looming crisis in affordability”, as the Commonwealth Fund coined it in its 2020 Biennial Health Insurance Survey.
As recent events made clear, there seems to be no political remedy in sight, and it is up to employers to get the job done.
At Care2care we are able to offer relief through actionable, reliable solutions on pharmacy benefits. We will be happy to present them on request.