The Milliman Medical Index made The Motley Fool’s list of “50 Amazing Numbers About the Economy.”
39. Health care for an average family now runs $19,393 a year, according to the Milliman Medical Index. It was about half that much in 2002.
The other 49 items are also worth pondering. Check out the full list here.
Hospitals that self-insure their professional liability and workers’ compensation coverage should keep an eye on the general rate of inflation. This dynamic is explored in an article in the latest issue of P&C Perspectives: “Estimating the impact of claim inflation on self-insured liabilities.” Here is an excerpt:
For some coverage typically self-insured by hospitals such as professional liability and workers’ compensation, the average time to payment after a claim is reported or incurred is several years. Therefore, the impact of an increase in the claim inflation rate for liabilities for these coverages can be highly leveraged…For example, for professional liability claims, a 1% increase in inflation can lead to liability increases of more than 4%. But, for workers’ compensation claims, a 1% increase in claims inflation can result in increases of more than 10% in the outstanding liabilities.
A new study, “Improved Management Can Help Reduce the Burden of Type 2 Diabetes: A 20-Year Actuarial Projection,” was announced yesterday at the National Conference on Diabetes in Washington, DC. Here is an excerpt from the press release:
“The expected growth of type 2 diabetes in America and the resulting healthcare costs are alarming,” said Kathryn Fitch, a co-author of the study and principal and healthcare management consultant at Milliman. ”We calculated that even modest improvements in diabetes control measures could reduce health complications, deaths and costs, particularly for the elderly.”
Milliman’s study estimated the impact of improving blood glucose, blood pressure and cholesterol control in type 2 diabetes patients. According to the report, fewer than two-thirds of patients meet the target ranges for any of these three measures (A1C <7%:49%; Systolic blood pressure <130:60%; LDL <100:39%)(1). The study found that reducing by half the number of people who are not meeting targets could, by 2031, reduce annual costs from diabetes-related complications by nearly $200 billion(2), reduce diabetes-related complications by 18 percent and reduce deaths from diabetes-related complications by 9 percent(3).
The study noted that the diabetes epidemic will continue to expand, and improving treatment and management practices are vital to reversing this trend. Over the next 20 years, type 2 diabetes cases outpace the growth of the U.S. population, to eventually affect 32 million patients (8.6 percent of the population)(4). With this jump in type 2 diabetes prevalence – and with people who have the disease expected to account for 15 percent of all national healthcare expenditures by 2031(5) – better patient management practices are urgently needed.
Michigan is pursuing stimulus funding to advance health IT:
The Recovery Act included more than $25 billion in grants aimed at improving the nation’s technology infrastructure and expanding adoption of electronic health records. The unprecedented amount of federal funding for health IT and broadband initiatives has provided some economic hope to states like Michigan, which boasts the highest unemployment rate in the country.
Faced with 15 percent unemployment, a $2.8 billion budget deficit and the struggling automotive industry, officials in Michigan are hoping the federal government’s IT investments provide a long-term windfall for the Midwestern state. With an eye toward enticing more technology firms to set up shop within the Michigan’s borders, state officials have teamed up with business groups and local universities to coordinate the state’s efforts on increasing adoption of both broadband and electronic health records.
Uwe Reinhardt offers another big-picture view of the economic implications of healthcare reform on CNN.com today:
America’s currently insured middle class will be increasingly desperate if health reform fails. Millions more such families will see their take-home pay shrink. Millions will lose their employment-based insurance, especially in medium and small-sized firms. And millions will find themselves inexorably priced out of health care as we know it.
Milliman Inc., an employee benefits consulting firm, publishes annually its Milliman Medical Index on the total health spending by or for a typical American family of four with private health insurance. The index totals the family’s out-of-pocket spending for health care plus the contribution employers and employees make to that family’s job-related health insurance coverage.
The Milliman Medical Index stood at $8,414 in 2001. It had risen to $16,700 by 2009. It is likely to rise to $18,000 by next year. That is more than a doubling of costs in the span of a decade!
Since 2005, the index has grown at an average annual compound rate of 8.4 percent. Suppose we make it 8 percent for the coming decade. Then today’s $16,700 will have grown to slightly over $36,000 by 2019.
Economists are convinced that this $36,000 would come virtually all out of the financial hides of employees, even if the employer pretended to be paying, say, 80 percent of the employment-based health insurance premiums. In the succinct words of the late United Automobile Worker Union leader Douglas Fraser:
“Before you start weeping for the auto companies and all they pay for medical insurance, let me tell you how the system works. All company bargainers worth their salt keep their eye on the total labor unit cost, and when they pay an admittedly horrendous amount for health care, that’s money that can’t be spent for higher [cash] wages or higher pensions or other fringe benefits. So we directly, the union and its members, feel the costs of the health care system.” (“A National Health Policy Debate,” Dartmouth Medical School Alumni Magazine, Summer 1989: 30)
Unfortunately, very few rank-and-file workers appreciate this fact. Aside from their still modest out-of-pocket payments and contributions to employment-based insurance premiums, most employees seem sincerely to believe that the bulk of their family’s health care is basically paid for by “the company,” which is why so few members of the middle class have ever been much interested in controlling health spending in this country.
The White House is deflecting criticism that cost-reduction plans are actually care-rationing plans.
We’ll leave the details of the policy to those championing it. The question of what is meant by “cost effective,” though, is of interest. Ron Harris and Clark Slipher offer their perspective on issues of healthcare cost and capacity in their recent article framing the health reform challenge:
Some would argue that cost must not enter into the discussion of how the healthcare system should operate, but this is simply not realistic. All societies have limited resources and, proportionally, the United States already spends much more on healthcare than any other Western nation, with outcomes that too often are inferior. The notion of limited resources is a harsh reality with which we, as Americans, are just now coming to grips. Choices must be made. As a 21st-century society, we want quality healthcare coverage to be available and affordable for all our citizens. In order for that to happen, we must make difficult choices.
One way to reduce costs is through strict, centralized budget controls—thereby fixing supply and effectively producing mandated prioritization and rationing of care. Another way is to identify and substantially reduce the inefficiency and waste that is embedded within the system. Improvement in efficiency and elimination of waste are much more acceptable and enduring strategies within a U.S. context than budget controls and rationing.
Today’s big news has care providers, insurers, and pharmaceutical companies joining in a pledge to reduce healthcare costs, with estimates of an eventual 1.5% annual cost reduction and bottom-line savings of $2,500 for a family of four. The commitment is impressive. It may also need to be put in perspective, and the launch next week of Milliman’s annual healthcare cost and trend report may do just that.
In 2008, the medical cost for a typical family of four increased by 7.6%. While we won’t be able to release the 2009 figures until next Monday, the 2008 number helps illustrate the ambition of these proposed savings. Based on that cost trend, the typical American family spent $1,109 more in 2008 than in 2007. Again, the proposed $2,500 in per-family savings is pretty agressive.
How will the promise of savings be enforced? We’ll know more later in the day, but right now it sounds like the effort is largely voluntary. An agreement over a fundamental change in the cost trend is nothing to sneeze at, though pulling it off will require more than just good intentions.
The Milliman Medical Index (MMI) offers prospective healthcare cost information for the typical American family of four. Contact us at townhall@milliman.com for more information on next Monday’s launch of the MMI.
The head of the White House Office of Healthcare Reform stoked some controversy this week by suggesting that a Medicare-like model is not the only way to go when it comes to a public healthcare option:
There are different breeds of public plans that could be part of this.”
Nancy-Ann DeParle
The response from many organizations has been negative. Still, there are certainly other models. Before the Medicare-like public plan idea gained steam, an FEHBP-type plan was often mentioned. Then there is the Healthy American Act.
Not to mention ideas from overseas. The Dutch system has drawn a lot of attention; see the interview below for more information on that.
A wholesale change seems less likely than something incremental, but perhaps there are things to learn from other countries. Either way, it is simply too early to handicap this race.
For profit, for everyone: Exploring the Dutch healthcare system
The Dutch healthcare system is the world’s only private system of basic healthcare insurance operated by insurance companies for profit. We asked Dutch healthcare actuaries Roeleke Uildriks and Ji Kwen Ng to explain.
NPR interviewed Peter Orszag of the White House Office of Management and Budget this morning. While the entire interview is worth a listen, one quote jumps out:
Estimates suggest that as much as $700 billion a year in health care costs do not improve health outcomes. It occurs because we pay for more care rather than better care. We need to be moving towards a system in which doctors and hospitals have incentives to provide the care that makes you better, rather than the care that just results in more tests and more days in [the] hospital.
That $700 billion in waste squares with estimates from “Imagining 16% to 12%: A vision for cost efficiency, improving healthcare quality, and covering the uninsured.”
Cost, Economy, Efficiency, Reform, Value
The latest post at The Health Care Blog features an article by Bruce Pyenson, Kate Fitch, and Sara Goldberg about their recent healthcare reform report, “Imagining 16% to 12%,” which provides an actuarial yardstick for health reform proposals and efficiency targets for the US healthcare system.
Cost, Economy, Efficiency, Electronic Health Records, Evidence-based Requirements, Fragmented system, Portablity, Reform, Research
Follow us on Twitter