Cost of Health Care
double-digit increases predicted for the next decade, the cost
of health care has started appearing more frequently in the news.
What's fueling the cost increases?
drugs. This is the fastest growing health care expense,
and it is projected to grow at 20 to 30 percent each year over
the next several years. There are many newer, more expensive
drugs on the market, and the use of these prescriptions is exploding.
In addition, with so much television advertising, many consumers
ask their doctors for expensive, brand name drugs when there
may actually be a generic drug that works just as well.
of developing new technologies and treatments. Over
the past decade, scientists have made significant advancements
in the treatment of certain diseases. Unfortunately, just like
any new product, the cost of developing these new technologies
and treatments is extremely high. Plus, unlike other technology,
health technology generally doesn't decrease in price over time.
demand for health care. More and more people with
medical insurance are relying on the health care system as new
technologies and treatments become available. This leads to
a greater number of claims for payment by insurance companies,
the costs of which are passed back to health care consumers.
aging population. The "baby-boom" generation
is entering its peak health-care-using period. In fact, over
eighty million Americans will turn 50 in the next 10 years.
The cost of providing health care to them will be staggering.
in uncompensated care. There are an estimated 44
million Americans who don't have health care insurance, and
the cost of providing care to this group is borne indirectly
by the insured consumers.
legislation. Proposed government mandates--such as
the Patients' Bill of Rights, Medicare reform, and health care
tax changes--will continue to drive health care costs up.
of these increased costs flow through insurance companies and
eventually trickle down to employers in the form of higher medical
costs. Penn is certainly feeling the effects of this national
Benefits Stack Up:
Penn Benefits Remain Competitive
how do Penn's benefits stack up against the competition? This
year our benefits consulting firm, Hewitt Associates, conducted
two studies that show that the benefits we offer to employees
are on par with those offered by local and national employers
and our peer universities.
year, national employers in the study contributed roughly 82%
toward the cost of employees' health care benefits, while local
employers contributed about 83%. Penn's subsidy level, at 82%,
was right in line with these employers, as the graph below shows.
study also looked at the total amount of money employees pay for
health care. We found that while Penn employees paid slightly
more out of their paycheck last year compared to the market average,
the "out-of-pocket" costs (expressed as a percentage
of the total cost) were between 2 and 4 percent lower, as shown
below. Out-of-pocket costs include such items as copayments for
doctor visits and prescription drugs and annual deductibles.
also compared just our faculty health care benefits (identical
to benefits for staff) to those offered by other Ivy League and
Tier One Research Institutions. The results showed that the amount
we contribute to the cost of faculty health care--relative to
the level of benefits delivered--is more generous than what our
competition contributes. In addition, we learned that very few
institutions still subsidize dental benefits as Penn does.
Barbara J. Lowery, Associate Provost
-- John J.
Heuer, Vice President for Human Resources
Almanac, Vol. 48, No. 25, March 5, 2002
March 5, 2002
Volume 48 Number 25