Business Leaders Identify Healthcare Cost Drivers; BCBSA Research Highlights Perception of Key Cost Drivers

3/7/2002

From: John Parker of the Blue Cross and Blue Shield Association (BCBSA), 202-626-4818; e-mail: john.parker@wro.bcbsa.com

CHICAGO, March 7 -- Results from a new Blue Cross and Blue Shield Association survey reveal that 64 percent of healthcare benefits purchasers cite prescription drugs as the main driver of U.S. healthcare costs. Of that group, 62 percent said that increased direct-to-consumer advertising is the main cause for the continued dramatic rise in pharmaceutical costs (See Chart 1).

Chart 1: Top 3 Reasons for Increasing Rx Prices

Consumer advertising..............62 Percent Research/development..............44 Percent Profit margins....................36 Percent

"These results are very significant," said Scott P. Serota, president and chief executive officer of the Blue Cross and Blue Shield Association. "The healthcare purchasers represented in this survey are on the frontline of America's healthcare cost battle. Everyday, they are trying to find ways to keep quality healthcare affordable for their workers. When asked what they believe to be the key drivers of healthcare cost, U.S. business leaders pointed overwhelmingly to pharmaceuticals."

More than 500 business decision-makers were asked what they believe are the key drivers behind rapidly accelerating healthcare costs. Double-digit healthcare cost increases have returned after nearly a decade of slower growth.

Beyond the impact of pharmaceutical costs, benefits managers said that consumers (33 percent) and hospitals (30 percent) were the next key drivers of healthcare cost increases. Reasons given for the consumer impact on costs were the aging of the baby-boomer population, demand for drugs and treatment as well as growing overall usage of the healthcare system. Costs associated with the uninsured, technology advances and facilities expansion were the top considerations given to increased hospital costs (See Chart 2).

Chart 2: Reasons for Higher Utilization by Consumers

Increasing age........................52 Percent Demand for latest treatments..........37 Percent Over use..............................32 Percent

"Nearly 40 million Americans may lack the healthcare services they need because they can't afford health insurance," continued Serota. "Rising hospital and pharmaceutical costs, new technology, increased utilization and government regulations are stretching healthcare affordability to its limits. Add to that the changing demographics of an aging baby-boomer population and the problem, if not addressed, will worsen. The Blue Cross and Blue Shield System is determined to make a difference for today's generation and tomorrow's."

BCBSA and the 43 independently licensed Blue Plans have embarked on a multi-year initiative to reach out to key stakeholders in the U.S. healthcare system to find ways to make healthcare more affordable while maintaining quality and choice. BCBSA is conducting a series of research projects designed to provide valuable information to be used to improve healthcare affordability.

The Blue Cross and Blue Shield Association is comprised of 43 independent, locally operated Blue Cross and Blue Shield companies that collectively provide healthcare coverage for 82 million -- more than one in four -- Americans. For more information about the Blue Cross and Blue Shield Association and its member companies, visit www.bcbs.com.