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i <br /> Table 1 <br /> The Factors Driving Rising Costs in Healthcare Premiums (2001-2002) <br /> Trend Factors Percentage Percent of Total <br /> Points Increase <br /> Medical Trend 13.7% 100% <br /> General Inflation (CPI) 2.5% 18% <br /> Drugs, Medical Devices and Medical Advances* 3.0% 22% <br /> Prescription drugs <br /> Other advances in diagnostics and treatment <br /> Rising Provider Expenses 2.5% 18% <br /> Hospitals (consolidated, in particular) negotiating higher payments <br /> Government Mandates and Regulation 2.0% 15% <br /> Over 1,500 existing mandates at state and federal level <br /> New mandated benefits <br /> S Elimination of cost-control tools or limiting flexibility to use them <br /> Regulatory requirements (red tape, duplication of federal and state <br /> requirements) <br /> Increased Consumer Demand 2.0% 15% <br /> Aging population <br /> "Front page" treatments (i.e., media coverage drives demand for <br /> expensive treatment) <br /> Increased preventive and diagnostic activity <br /> Consumers moving away from less expensive managed care products <br /> Litigation and Risk Management 1.0% 7% <br /> Class action lawsuits <br /> Outsized awards and legal costs <br /> Defensive medicine <br /> Malpractice premiums <br /> Reinsurance/risk management <br /> Other Categories 0.7% 5% <br /> Fraud and Abuse <br /> Miscellaneous <br /> Source: PricewaterhouseCoopers analysis,April 2002. <br /> * This percentage does not reflect potential future savings from drugs, medical devices and other medical advances.For example, <br /> savings in future years may include reduced hospitalizations and consumption of other healthcare services. <br /> S <br /> 3 <br />