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August 2004, Vol. 127, No. 8
Trends in employer-provided prescription-drug coverage
Prescription drugs are an integral part of the high-quality health care those living in the United States have come to know. More than 60 percent of Americans fill at least one prescription annually.1 U.S. expenditures on prescription drugs reached $162.4 billion in 2002, more than 10 percent of the total spent on all health care.2 From 1993 to 2003, while the general rate of inflation remained relatively low, medical care costs continued to rise rapidly, with prescription-drug costs one of the contributing factors.3 Chart 1 depicts the Consumer Price Index (CPI) growth rates in the prices of prescription drugs and medical supplies, all medical care, and all items over the 1993–2003 period.
As one of the main sources of health coverage in the United States, private-sector employers are striving to contain the cost of employee medical plans and, along with them, the cost of prescription-drug coverage. Employers have implemented a variety of methods to stem the rising costs of providing such coverage. This article examines Bureau of Labor Statistics (BLS, the Bureau) data on employer-provided prescription-drug coverage and discusses how cost-saving methods have emerged over the past decade.
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1 Rachel Christensen Sethi, Employee Benefit Research Institute Issue Brief No. 265, January 2004, p. 1.
2 Centers for Medicare and Medicaid Services, on the Internet at both http://www.cms.hhs.gov/statistics/nhe/historical/t2.asp and http://www.cms.hhs.gov/statistics/nhe/historical/chart.asp, Jan. 8, 2004 (visited Mar. 26, 2004).
3 The All Items Consumer Price Index for All Urban Consumers (CPI-U; 1982–84 = 100) went from 145.3 in December 1993 to 184.3 in December 2003, an increase of 26.8 percent; the Medical Care CPI-U (1982–84 = 100) moved from 205.2 in 1993 to 302.1 in 2003, an increase of 47.2 percent; and the Prescription Drugs and Medical Supplies CPI-U (1982–84 = 100) grew from 225.7 in 1993 to 329.1 in 2003, an increase of 45.8 percent. (See Consumer Price Index Detailed Report (Bureau of Labor Statistics, December 2003), table 25, "Historical CPI for all urban consumers, 1993–2003," pp. 78–84.)
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