US health care costs keep rising in 2010

Despite the worst recession since the 1920s, health care costs keep rising. A study by PricewaterhouseCoopers (PwC) says American workers should expect their health costs to rise by 9% next year. That is less than in 2008 (9.9%) and 2009 (9.2%), but still well above inflation and wage growth.

PwC says part of the reason is that workers who fear losing their jobs, and with them their health insurance, rush to use their insurance while they still can. Other reasons include rising unemployment, which means more uninsured or underinsured people, fewer people in commercial plans and more relying on Medicaid.

Whatever the causes, businesses will face higher insurance costs and pass them on to employees: 42% of employers expect workers to pay more for their health plans. This is a heavy burden, especially for workers whose pay has been frozen or cut: over the past five years, health care costs have risen four times as fast as wages.

The laws being debated in Congress will have a limited effect on rising costs, but frequent media focus on the subject may slow them. Other things that will affect costs:

The switch from brand-name to generic drugs. Brand-name drugs made up 67% of US prescriptions in 2007, but five major drugs lose their patents in 2010, and more will follow in 2011 and 2012.
Better wellness and disease management programmes. Only 40% of employees take part in programmes to improve general health, and 15% in programmes to manage chronic diseases.
More high-deductible insurance plans, in which patients pay part of the cost of treatment, which is expected to reduce use of the health system.

The biggest cause of rising costs is overuse of the health system, because providers are paid more for doing more, even when it isn't needed.