Employer Study Shows Medical and Pharmaceutical Spending Only Part of Healthcare Costs

On average, every $1 of medical and pharmacy costs is matched to $2.30 of health-related productivity costs -- and that figure is much greater for some conditions.

Employers who focus only on medical and pharmacy costs in creating employee health strategies may misidentify the health conditions that most impact the productivity of their employees, according to a major study published in the April 2009 issue of the Journal of Occupational and Environmental Medicine.

When considering medical and drug costs alone, the study found, the top five conditions driving costs are cancer (other than skin cancer), back/neck pain, coronary heart disease, chronic pain, and high cholesterol. But when health-related productivity costs also were measured, the top five chronic health conditions driving overall health costs shifted to depression, obesity, arthritis, back/neck pain and anxiety.

The study examined the effects of "presenteeism," or employees at work but with health conditions that prevent them from performing at full capacity, and found that impaired employee performance typically was more costly than having employees absent from work.

The study followed 10 organizations employing more than 150,000 workers. Companies ranged from an industrial chemical manufacturer and a computer hardware manufacturer to telecommunications and technology companies.

The study, coordinated by the American College of Occupational and Environmental Medicine (ACOEM), the Integrated Benefits Institute (IBI), and health management services provider Alere LLC, was conducted via the Alere Center for Health Intelligence and funded by the National Pharmaceutical Council.

"The wake-up call for U.S. employers is that simply looking at the costs of specific medical conditions by adding up medical and pharmacy claims costs alone won't give a true picture of the full impact of poor health on the much greater costs of lost productivity in the workforce," said Ronald Loeppke, MD, MPH, executive vice president of Health and Productivity Strategy for Alere and one of the study's lead researchers.

Among the study's other findings:

  • Health-related productivity costs are significantly greater than medical and pharmacy costs alone. On average, every $1 of medical and pharmacy costs is matched to $2.30 of health-related productivity costs -- and that figure is much greater for some conditions.
  • Co-morbidities -- employees with multiple chronic health conditions -- drive the largest effects on productivity loss. The study calls for further research to better evaluate the impacts of co-morbidities by conditions and combinations of conditions.
  • The impact of poor health on productivity impacts all levels of an enterprise. Executives/managers seem to suffer high presenteeism productivity loss related to specific health conditions along with those in non-managerial jobs.

Researchers analyzed more than 1.1 million medical and pharmacy claims during the study. To fully gauge health-related productivity costs, researchers measured medical and pharmacy spending along with lost-productivity costs related to absence and presenteeism. Researchers compared pharmacy and medical claims data to employee self-reported absence, presenteeism and health information collected through the Health and Work Performance Questionnaire (HPQ), developed by Harvard University researcher Ronald Kessler, PhD, and the World Health Organization. Information collected on employer business measures was combined with this database in modeling health-related lost productivity.

The analysis employed by the research team breaks down the silos typically used when examining the cost of health care for a company. "When medical costs are viewed in a silo, or without the broader context of the full health- related costs, the full impact of a given health condition may be seriously underestimated without accurately assessing the accompanying costs of lost productivity," Dr. Loeppke said.

"A healthy workforce is critical to an employer's ability to compete in today's economy," said Dan Leonard, president of the National Pharmaceutical Council. "This landmark study can help employers understand the importance of balancing health care costs with quality of care and wellness and prevention initiatives when designing benefits. By recognizing these issues, employers can take steps toward improving employee health, productivity, and retention, as well as spend their health care dollars more effectively."

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