The School Employees Retirement System of Ohio's prescription for cost-effective health care.

AuthorAnderson, Thomas R.
PositionPreferred Pharmacy Program

For the 49,000 retirees of SERS, an innovative program puts the brakes on the rising costs of prescription drugs and for the retirement system's administrators, it dramatically reduces paperwork and processing costs.

Editor's note: Each year the Government Finance Officers Association awards its prestigious Awards for Excellence to recognize outstanding contributions in the field of government finance. The awards stress practical, documented work that offers leadership to the profession and promotes improved public finance. This article describes the 1992 winning entry in the retirement administration category.

At a time when overall health care costs are increasing at a staggering rate, a new program that saves retirees and their pension fund more than $2 million a year is a significant victory in the cost-containment battle. The innovative program detailed and illustrated in this article has proven highly successful for the School Employees Retirement System (SERS) in putting the brakes on a key component of health care costs. It is also having a positive impact on the quality of life enjoyed by more than 49,000 retirees of SERS, most of whom rely almost entirely on the system for their health care benefits. SERS provides its retirees with a full array of health care benefits including major-medical coverage, a mail order prescription program for maintenance drugs and the revolutionary Preferred Pharmacy Program for prescriptions that need to be filled immediately.

The Problem

Americans today are living longer and more productive lives, due in large part to the many medical discoveries of recent decades. But there is a price attached to these advances--a price that is threatening the very health care system on which Americans rely.

Of particular concern to older Americans and the pension funds that provide for their well-being is the dramatically rising cost of health care, especially the prescription drugs that are so vital to maintaining a good quality of life in one's later years. Prescription drugs account for more than 25 percent of the total cost of retiree health care, and the price of prescription drugs is rising faster than other health care components, as illustrated in Exhibit 1.

Rising prescription drug costs hit retirees especially hard. Prescription drug use of retirees is six times greater than that of nonretired persons. The obvious explanation for this higher prescription drug use is that many retirement-age individuals are afflicted with one or more of the...

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