Tag Archives: Dave Liner

Healthcare costs reach $6,348 for the average American, $28,386 for hypothetical family of four

Milliman today released the 2019 Milliman Medical Index (MMI), which measures healthcare costs for individuals and families receiving coverage from an employer-sponsored preferred provider organization (PPO) plan. New this year, the MMI includes an interactive web tool that allows users to explore how healthcare costs can vary for different family compositions.

“We’ve been publishing the MMI for 15 years and we’ve always viewed healthcare costs in terms of a hypothetical family of four, but this year we decided to expand our approach,” said Chris Girod, coauthor of the Milliman Medical Index.

“What we’re most excited about this year is the ability to let people understand how different sorts of families face different sorts of healthcare costs,” said Tom Snook, coauthor of the MMI. “There’s no such thing as a ‘typical’ American family, and now our readers can choose their own family and understand how different demographic factors—such as age, gender, and area—contribute to healthcare costs.”

To see the interactive tool, click here.

In 2019, healthcare costs for our hypothetical family of four have reached $28,386, an increase of 3.8% from the year prior. Healthcare costs for the average American adult are at $6,348.

The MMI continues to look at five components of healthcare costs, including inpatient and outpatient care, pharmacy, professional and other services. Prescription drug costs continue to be a big part of the healthcare MMI story, though this year they are playing a different role.

“This year’s 2.1% prescription cost increase helps to moderate the overall healthcare cost trend,” said Sue Hart, coauthor of the MMI. “Still, we know from prior years how volatile prescription drug prices can be.”

“As part of our analysis of prescription drug pricing, we pay particular attention to the role of rebates in pharmaceutical costs,” said Dave Liner, coauthor of the MMI. “Last year, rebates received as a percentage of prescription drug claims reached 19.5%, up from 10.2% in 2013.”

In a shift from most prior years, employers shouldered more of this year’s cost increase than employees.

“Over the years that we have tracked the MMI, the long-term trend has been for employees to pay an increasingly higher percentage of total costs,” said Scott Weltz, coauthor of the MMI. “But we’ve seen a shift since 2017, with employer contributions increasing by 5.1% and employee costs growing by less than 1% last year. This year, employees saw a 3.6% increase, compared to a 4.0% increase for employers.”

To view the complete MMI, click here.

Regulatory capital strategy considerations

Healthcare providers and health plans continue to integrate vertically through consolidation and virtually through accountable care organization (ACO) risk-sharing arrangements. In this article, Milliman’s Dave Liner discusses how providers and health plans can improve their financial performance by considering strategies that optimize regulatory capital.

Three-pillar strategy for value-based contracting

Healthcare providers can improve their financial performance under value-based contracts by implementing an effective contracting strategy. Milliman consultants David Williams, David Liner, and Colleen Norris discuss how providers can accomplish that by prioritizing and measuring operational and contractual elements against three core pillars: transparency, stability, and control. Here is an excerpt from their article “Building a successful value-based payer contracting strategy.”

Providers prioritize each pillar and attribute to create weights for each cell. Contractual elements are then evaluated against those pillars to produce a score for each cell. This can be either a subjective evaluation or a more rigorous analytic evaluation depending on the nature of the element. The weighted scores can be used to prioritize areas of administrative concentration and to compare payer contracts on a similar basis. This prioritization is a critical step to a successful contracting evaluation process….

…The exercise of scoring the grid identifies high-risk elements and compares contract structures from different payers that require revisions. When performed rigorously, this process brings focus that allows management to spend more time on contracts with the greatest risk and potential for improvement. Applying each pillar to specific payer contract elements identifies specific risks and creates areas of focus for providers during negotiation. However, this analysis alone does not enable providers to easily compare value-based contracts in their entirety.

The complex evaluation process is illustrated below in a simplified form. The intent of this illustration is to highlight important aspects of the decision-making process required to effectively manage complex payer relationships.

First, the contract is scored for each pillar and element cell in the scoring grid. Each contract is evaluated separately and may contain different elements. The provider may require independent help.

Second, the provider weights each cell in the grid based on priorities. These weights would likely be consistent across contracts. The provider may counsel with outside help to prioritize, but ultimately will be responsible for the focus of their efforts.

Finally, the total score is calculated by applying weights in each cell based on prioritization of the contracting elements. Figure 2 illustrates this contract-scoring approach.

MedPAC’s proposed changes to Medicare Part D: Considerations for Part D plan sponsors

The Medicare Payment Advisory Commission’s proposed modifications to the Part D federal reinsurance program could change the financial dynamics for Plan D plan sponsors, particularly if appropriate updates are not made to the risk score model. This paper by  Milliman consultants David Liner and Nick Johnson outlines key considerations for plan sponsors as they prepare for proposed changes to the Part D program.

This article is part two of a two paper series. Read paper one about considerations for Part D stakeholders.

Financial analysis of ACA health plan issuers

The Patient Protection and Affordable Care Act (ACA) includes risk mitigation programs, also known as the 3 Rs, for individual and small group health insurance markets. The 3 Rs include a permanent risk adjustment program, a transitional reinsurance program for the individual market, and a temporary risk corridor program. The transitional reinsurance and temporary risk corridor programs span from 2014 through 2016, while risk adjustment is a permanent program. The intent of these programs is to mitigate adverse selection and enhance market stability. The 3 Rs also affect financial reporting, and ACA health plan issuers faced many challenges when estimating the financial impact of the 3 Rs on 2014 financial statements. Our research suggests that ACA health plan issuers developed 2014 financial statements in a particularly uncertain environment. In this paper, Daniel Perlman and Dave Liner summarize 2014 3R estimates compared with actual amounts published by the Center for Consumer Information and Insurance Oversight (CCIIO).

Potential opportunities for captive insurers in HCR environment

The Patient Protection and Affordable Care Act (PPACA) is changing the landscape of U.S. healthcare and will create the need for new entities that can take on and manage financial risk. Captive insurers have experience in this area already, and may find that implementation of the PPACA and healthcare reform (HCR) brings them significant new opportunities. Dave Liner and Kathleen Ely examine this dynamic in a new paper.