The Increasing Cost of Health Care - The Hardship Of High Health Care Costs On Families

Families USA is a national, nonprofit, nonpartisan consumer organization based in Washington, D.C., dedicated to achieving affordable, quality health care and long-term care for all American families. The organization describes itself as "the voice for American consumers," and contends that American families pay about two-thirds of the nation's health care bill, while American businesses pay the other third. This ratio is based on the premise that families and businesses pay for health care in several ways:

• Directly, through out-of-pocket payments and insurance expenses, such as premiums, deductibles (annual amounts that must be paid by the employee before the insurance plan begins paying), and co-payments
• Indirectly, through Medicare payroll, income, and other federal, state, and local taxes that support public health programs. These include veterans' health benefits, military health benefits, the Medicaid program, and a variety of smaller public health programs.

As a result, Families USA estimates of per capita health spending differ from other reports, such as those from the CMS and the U.S. Census Bureau, which take into account only direct payments.

Families also purchase insurance themselves when they work for employers that do not offer group health insurance, or when insurers refuse to insure certain groups they consider to be at high risk (such as persons with chronic diseases). Workers who retire before reaching age sixty-five and are not yet eligible for Medicare coverage also must purchase insurance on their own. Further, many Medicare beneficiaries pay insurance premiums for supplemental (Medigap) insurance to cover the difference in charges that Medicare does not pay, as well as uncovered costs, such as prescription drugs.

The High Cost of Prescription Drugs

Spending for prescription drugs is the fastest-growing component of health care spending. Families USA decried the escalating costs of prescription drugs in a study that found that between January 2001 and January 2002 the prices of the fifty most commonly prescribed drugs for older adults rose nearly three times the rate of inflation. Since many older adults live on fixed incomes, these dramatic price increases may prevent them from obtaining life-saving medications. The Families USA report Bitter Pill: The Rising Prices of Prescription Drugs for Older Americans (Washington, DC, June 2002) observed that drug prices have outpaced inflation for at least a decade and that that generic drug prices rose more slowly than brand-name pharmaceuticals.

Families USA also refuted the pharmaceutical companies' claims that high drug prices simply reflect the companies' efforts to recoup their investments in drug research and development. Families USA asserted that prices for drugs that have been on the market for more than ten years continued to rise more sharply than the rate of inflation, long after the pharmaceutical companies should have regained their initial investments and realized substantial profits. Their 2001 analysis of the nine U.S. pharmaceutical companies that manufacture or market the fifty top-selling drugs for older adults revealed that profits consistently exceeded spending on research and development.

To control prescription drug expenditures, many hospitals, health plans, employers, and other group purchasers have attempted to obtain discounts and rebates for bulk purchases from pharmaceutical companies. Some have developed programs to encourage health care practitioners and consumers to use less costly generic drugs, and others have limited, reduced, or even eliminated prescription drug coverage.

More than half of Americans surveyed think prescription drug prices are high and should be controlled by the government. (See Table 5.10.) Research conducted by Harris Interactive in April 2003 found that 45% of survey respondents felt that prescription drug prices were "much higher here" in the United States than in Canada and Western Europe. Another 18% of respondents believed them to be "somewhat higher here." Just 5% of respondents considered drug prices "somewhat lower here," and 1% called them "much lower here" than in Canada and Europe. (See Table 5.11.)

A January 2004 Harris Interactive survey found that many Americans are aware that prescription drugs cost more in the United States than they do in Europe. Of the survey respondents, 39% felt that prescription drugs were "much more expensive" and 58% said they were merely "more expensive." (See Table 5.12.) Older adults were even more acutely aware of the price differential—very likely because they use and pay for prescription drugs more often than young adults. More than two-thirds (70%) of persons aged sixty-five and older know that prescription drugs cost more in the United States than in Europe and nearly half (49%) know that prescription drugs are "much more expensive" in the United States. (See Table 5.13.)

MANY OLDER ADULTS CANNOT AFFORD PRESCRIPTION DRUGS. A survey of nearly eleven thousand older adults in eight states conducted in 2001 by the Kaiser Family Foundation, the Commonwealth Fund, and Tufts-New England Medical Center found that cost prevented almost one quarter of all survey respondents from filling their prescriptions or caused them to skip doses of prescribed medications. The study also found that the percentage of all older adults surveyed who did not have prescription drug coverage varied among the eight states from highs of 31% in Illinois and Texas to lows of California (18%) and New York (19%).

A 2004 Families USA report, Sticker Shock: Rising Prescription Drug Prices for Seniors (Washington, DC, June 2004), predicted that older adults anticipating that the Medicare prescription drug law, enacted in 2003 to take effect in 2006, will afford them significant savings may be disappointed. The report found that the prices of

TABLE 5.10

Public opinion on federal government price controls for prescription drugs, 2003
WOULD YOU FAVOR OR OPPOSE FEDERAL GOVERNMENT PRICE CONTROLS OF… PRESCRIPTION DRUGS?
Base: All adults
	February 2000 %	June 2000 %	June 2001 %	March 2002 %	April 2003 %
SOURCE: "Table 3. Support for Federal Government Prescription Drug Price Controls," in Health Care News: Prescription Drug Prices, Hospital Costs, and Doctors' Fees, vol. 3, no. 9, Harris Interactive, June 2003, http://www.harrisinteractive.com/news/newsletters/healthnews/HI_HealthCareNews2003Vol3_Iss09.pdf (accessed July 7, 2004). © 2003, Harris Interactive Inc. All rights reserved. Reproduced with permission in 2004.
Favor federal government price controls of prescription drugs	60	57	61	67	56
Oppose	37	39	34	29	39
Not sure	3	4	5	4	5

the top thirty brand-name prescription drugs dispensed to older adults had increased by almost 22% during the three years preceding the January 2004 study. Of the thirty frequently prescribed drugs, twenty-eight increased in price by two or more times the rate of inflation, twenty-one increased in price by three or more times the rate of inflation, and just one drug did not increase in price.

According to the report, the top five brand-name drugs prescribed for seniors rose especially quickly:

• Lipitor, prescribed to lower cholesterol, rose 5.5 times the rate of inflation.
• Plavix, intended to prevent blood clots, rose 5.3 times the rate of inflation.
• Fosamax, prescribed for persons with osteoporosis, rose 4.6 times the rate of inflation.
• Norvasc, used to treat high blood pressure, rose 6.6 times the rate of inflation.
• Celebrex, prescribed to relieve arthritis and joint pain, rose 5.4 times the rate of inflation.

Issued just days before the Medicare drug discount program took effect in June 2004, the report ventured that the one out of six (7.4 million) older adults who participate in this interim measure will continue to pay much higher prices for prescription drugs than they had in years past. The five out of six older adults who do not participate in the drug discount prices will suffer the full force of rapidly rising prescription drug prices. Even when the entire Medicare population is covered by the full implementation of the discount plan in 2006, many older adults will find their prescriptions unaffordable.

TABLE 5.11

Public opinion on prescription drug prices in the United States, Canada, and Western Europe, 2003
HOW DO YOU THINK THE PRICES OF PRESCRIPTION DRUGS IN THIS COUNTRY COMPARE WITH DRUG PRICES IN CANADA AND WESTERN EUROPE? ARE THE PRICES HERE MUCH HIGHER, SOMEWHAT HIGHER, ABOUT THE SAME, SOMEWHAT LOWER OR MUCH LOWER?
Base: All adults
	February 2000 %	June 2000 %	June 2001 %	March 2002 %	April 2003 %
Note: Columns may not add up to 100% due to rounding.
SOURCE: "Table 5. Prescription Drug Prices: International Comparisons," in Health Care News: Prescription Drug Prices, Hospital Costs, and Doctors' Fees, vol. 3, no.9, Harris Interactive, June 13, 2003, http://www.harrisinteractive.com/news/newsletters/healthnews/HI_HealthCareNews2003Vol3_Iss09.pdf (accessed July 7, 2004). © 2003, Harris Interactive Inc. Reproduced with permission in 2004.
Much higher here	25	29	35	37	45
About the same	8	7	7	4	5
Much lower here	2	2	1	1	1