One on One with Michael Thompson, Partner, PricewaterhouseCoopers
Monday, June 22, 2009
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SUSIE GHARIB: President Obama announced an agreement today with major pharmaceutical companies to cut the cost of prescription drugs for seniors on Medicare. The deal discounts medications for Medicare beneficiaries who reach the so-called donut hole gap in drug coverage. The president called it a major step forward toward national health care reform.
Our guest tonight just completed a big report on how rising medical costs will impact U.S. businesses and workers in the next year. Joining us now, Mike Thompson, partner at PricewaterhouseCoopers. Hi, Mike.
MICHAEL THOMPSON, PARTNER, PRICEWATERHOUSECOOPERS: Hi.
GHARIB: So you say in your report that more employers will ask their employees to pay a bigger portion of their health care plan. So tell us what this means for employees. How much more are they going to have to pay and for what?
THOMPSON: Well what our reports shows is that we're anticipating health care costs to increase approximately 9 percent next year. And how that translates to employees is that if employees just picked up their share, they would pick up 9 percent. But what's more likely to happen is employers who are under increasing pressures for cost reduction are likely to shift some of those costs on to employees. So employees could actually anticipate a double-digit increase.
GHARIB: And what will they be paying more for, more premiums or bigger deductibles, what will it be?
THOMPSON: It could come in multiple forms. It could come in the form of higher premiums but it also could come in the form of higher cost sharing, deductibles or co-pays.
GHARIB: All right so, do you think that by workers having to pay more out of pocket, that this will bring health care costs down or really won't make a material difference?
THOMPSON: Well, there is some evidence that suggests that when employees actually share in the costs more, that they do use the services more thoughtfully. But I don't think it will have a material difference in the short run.
GHARIB: Now you also say in your report that companies will be, you know, pushing more for wellness programs. And I'm not quite clear sure what that means for an employee. Will they get special deals or deductions on their health care costs for that? But also, does wellness reduce health care costs for a company?
THOMPSON: Well, wellness -- you know, peoples' health behaviors have a material impact on their health needs, you know. The obesity epidemic and smoking does increase health care costs. And so I think what employers are hoping to do is help employees to change their behaviors, to be healthier and hopefully reduce the need for health care services and they'll save and employees will save if they do.
GHARIB: Now a lot of workers are very concerned that they are going to lose their jobs. And so as a result they are going ahead and scheduling all sorts of medical procedures while they still have insurance. What impact does that have on the companies and on the workers who are continuing to work at those companies?
THOMPSON: Yeah, so one of the factors that we did find in our report is that employer -- employees that still have coverage, employees that still have jobs are more anxious and particularly wary of not getting things done while they have coverage so they're actually increasing their use of services. And that actually drives up costs for those, for those employers and for the employees that do have coverage through their employers.
GHARIB: Now as you know, Mike, in Washington there's a lot of discussion about health care reform, nobody knows yet if it's going to happen or what kind of package will come out of Washington. But as you look at all of the possibilities, will health care reform materially change how much companies and individuals pay for their health care? Will it be more, less or the same?
THOMPSON: Well, in the short run it won't have much impact at all. It will take many years for the reforms that are being discussed to be implemented and then to have an impact on the premiums that employers are paying or what employees are paying. So we're looking at 2011, 2012 or even later.
GHARIB: But ultimately when health care reform does come about, if it comes about, will we as individuals pay less for our health care costs, our health care bills?
THOMPSON: A lot of the changes that are included in health care reform are intended to change some of the incentives in the system and build an infrastructure that allows us to better monitor what's actually happening in terms of the use of health care resources. And over the long haul I think there is an expectation. We will be able to moderate the rate of increases that we've been seeing over the past few years.
GHARIB: All right, thank you so much for coming by. We really appreciate it.
THOMPSON: Thanks.
GHARIB: My guest tonight, Mike Thompson, partner at pricewaterhouse coopers.
