2009 costs will continue to outpace inflation

Costs this year will be higher than inflation for all medical plan types, more than 4 percentage points higher than the change in the Consumer Price Index (rising at a yearly rate of 5.6 percent in July), and higher than the annual increase in earnings (2.8 percent in July). This pattern is similar to 2007 and 2008. The findings are in the 2009 Segal Health Plan Cost Trend Survey.

For the first time, prescription drug cost increases are projected to be below 10 percent and to drop below the rate of medical plan cost increases. The survey indicates that specialty drug prices will continue to rise almost twice as fast as ordinary drugs.

The variance in costs among managed care medical plan types continues to be marginal, “with less than a 2 percentage point difference in the forecasted rate of increase, ” says Eileen Flick, vice president and director of Segal’s Health Technical Systems. Medicare Advantage HMOs are projected to have a 7.1 percent rate of increase in medical plan costs for 2009, says Flick.

Factors that influence cost changes include price inflation, the leverage effect of fixed deductibles and copayments, cost shifting, and utilization increases because of aging, product promotion, and improved diagnostic services.

Source: 2009 Segal Health Plan Cost Trend Survey