Study: Health costs to rise nearly 10 percent

updated 2:19 p.m. ET June 17, 2008

NEW YORK - Employer health care costs are poised to rise almost 10 percent in 2008 — more than double the annual inflation rate — and nearly that much again in 2009, according to an industry report released Tuesday.

The study by PriceWaterhouseCoopers predicts that medical costs will increase 9.9 percent in 2008 and an additional 9.6 percent in 2009.

"Health care providers, insurers and employers will have to monitor medical costs carefully if we are to avoid a resurgence of the double-digit annual increases seen in the past," said Dr. David Chin, leader of the Health Research Institute at PriceWaterhouseCoopers.

The report identified two factors driving the increase:

• A hospital building boom, as hospitals replace facilities and add private rooms and centers for outpatient treatment.
• An increase in the expenses those with insurance are paying for those without. Cost-shifting from the uninsured, Medicare and Medicaid will account for nearly one in every five dollars spent by private insurers in 2009, according to the study, as the federal government underfunds public insurance programs and the number of people with private insurance continues to decrease.

One of the things employers are doing in response is increasing wellness, prevention and disease management programs, which they say not only keeps employees healthy but also raises productivity.

PriceWaterhouseCoopers surveyed more than 500 employers and health plans, with total coverage of more than 11 million people, for the report.

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