Tag Archives: Scott Weltz

Milliman Medical Index: Healthcare costs reach $6,553 for the average American, $28,653 for hypothetical family of four

Milliman today released the 2020 Milliman Medical Index (MMI), which measures healthcare costs for individuals and families receiving coverage from an employer-sponsored preferred provider plan (PPO).

“This year healthcare costs grew by approximately 4.1%, which is consistent with recent years but still outpaces growth in gross domestic product,” said Chris Girod, co-author of the Milliman Medical Index.

In 2020, healthcare costs for our hypothetical family of four reached $28,653. Healthcare costs for the average person are at $6,553. While these are averages, the MMI allows for greater specificity thanks to an interactive tool that was first released last year.

“The MMI can now estimate the cost of healthcare for different types of families,” said Paul Houchens, co-author of the MMI. “Using our interactive cost tool, you can choose the demographic factors of your particular family—such as age, gender, and location—and see how they contribute to your family’s own healthcare costs.”

To use the interactive tool, click here.

As it has for more than 15 years, the MMI continues to look at five components of healthcare costs, including inpatient and outpatient care, pharmacy, physician services, and other services.

“Hospital costs have stolen the show in recent years, increasing faster than other components,” said Scott Weltz, co-author of the MMI. “Hospital costs have increased by approximately 15% in the past three years, with other services growing 10% in that time.”

One of the things that makes the MMI unique is that it calculates both employer and employee contributions to healthcare costs, including out-of-pocket costs incurred at the point of care.

“Employers and employees are equally absorbing this year’s 4.1% cost increase,” said Dave Liner, co-author of the MMI. “Over time, economic changes and other forces tend to create an ebb and flow in how cost increases are shared by employers and employees.”

New this year, the MMI contemplates the potential for decreased costs using managed care.

“If we visit the land of ‘what if’ and apply optimal care management practices we could see healthcare costs for the typical family land 25% lower,” said Doug Norris, co-author of the MMI. “To date, this reduction is more aspirational, but huge potential exists in the American system for lower healthcare utilization and more efficient care.”

The COVID-19 pandemic introduces tremendous uncertainty to any estimate of 2020 healthcare costs, with major variables including the duration of the pandemic, the amount of care that may be deferred as a result of it, and the possibility of people losing their employer-sponsored coverage. Thus the 2020 MMI does not include an explicit adjustment for COVID-19.

To view the complete MMI, click here.

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.

Healthcare costs for typical American family reach $28,166 despite low annual rate of increase

Milliman today released the 2018 Milliman Medical Index (MMI), which measures the cost of healthcare for a typical American family of four receiving coverage from an employer-sponsored preferred provider organization (PPO) plan. In 2018, costs for this family will increase by 4.5%, approaching the lowest rate on record. Last year’s 4.3% increase was the lowest in the MMI’s 18-year history, and points to the recent deceleration in healthcare cost increases.

“There are two ways of looking at this year’s MMI,” said Chris Girod, coauthor of the Milliman Medical Index. “On the one hand it’s heartening to see the rate of healthcare cost increase remain low. On the other hand, we’re still talking about more than $28,000 in total healthcare costs for the typical American family.”

So is the American healthcare system bending the cost curve? What could be behind this apparent moderation in the annual rate of increase?

“We asked key stakeholders across the healthcare system what might be driving the decline in growth rates,” said Sue Hart, coauthor of the MMI. “Several common themes emerged, in particular provider engagement, more effective provider contracting, value-driven plan design, and spillover effects from public program initiatives.”

For the third straight year, prescription drug cost trends are down, though at 6% the rate of increase still exceeds other components of the MMI.

“Prescription drug costs have steadied, but this trend is volatile and hard to predict,” said Scott Weltz, coauthor of the MMI. “High-cost drugs can have a big impact on trends, as we witnessed a few years ago when hepatitis C treatments hit the market. Alternatively, point-of-sale rebates could push a consumer’s costs in the other direction, particularly for people taking high-cost drugs. As the environment evolves, changes in drug prices can be deployed quite quickly.”

To view the complete MMI, click here.





Milliman Medical Index: Typical American family faces $26,944 in annual healthcare costs

Milliman today released the 2017 Milliman Medical Index (MMI), which measures the cost of healthcare for a typical American family of four receiving coverage from an employer-sponsored preferred provider plan (PPO). In 2017, costs for this family will increase by 4.3%—which marks the lowest rate of increase in the history of this study—though the total dollar increase of $1,118 is consistent with the last decade of healthcare cost increases.

“The good news is that we are seeing a record-low 4.3% cost increase in this year’s MMI,” said Chris Girod, coauthor of the Milliman Medical Index. “The bad news: Continuing a 12-year pattern, healthcare costs for a typical family of four this year increased by more than $1,100.”

In recent years, the Milliman Medical Index has reported notable increases in pharmaceutical costs. Last year, drug costs increased by 9.1%. That rate of increase fell to 8% in 2017, which is still more than twice the rate of increase for all other components of healthcare spending.

“We’re seeing a smaller rate of increase for prescription drugs this year,” said Scott Weltz, coauthor of the MMI. “But the longer view reveals a different story. Since we began tracking this data in 2001, prescription drug costs for the typical American family have increased from $1,111 to $4,612.”

This year’s MMI includes analysis of dynamics driving healthcare costs, including the sometimes elusive nature of rebates in drug pricing. While rebates often do not result in cost savings for consumers at the pharmacy, they still impact the larger cost puzzle.

The MMI is unique among health cost studies because it measures the total cost of healthcare services used by the family of four, including out-of-pocket expenses paid at time of service. The MMI also separates costs into portions paid by employer versus employee. This year, the employer pays $15,259 of a family’s total healthcare costs and the employee—through payroll deductions and cost sharing at the time of service—pays $11,685.

“Back in 2001, the first year we measured the MMI, employees paid 39% of healthcare costs,” said Sue Hart, coauthor of the MMI. “This year, the family’s share of healthcare costs reached 43% of the total—an $11,685 total. We’ve seen a long, slow shift toward employees as these plans look to control healthcare costs.”

This year’s MMI includes discussion of the major components of the cost of care—payments to providers and the frequency and type of services used—and how they might vary outside the employer-sponsored system. Different discounts and payment mechanisms in the public markets can impact the costs for private insurers and therefore for the MMI family of four.

To view the complete MMI, click here.





Repeal, replace, or reform: Key policy discussions affecting the individual health insurance market

How might the Patient Protection and Affordable Care Act (ACA) be affected by the incoming Trump administration? The new administration and the Republican Party are considering a number of policy ideas regarding ACA’s repeal, replacement, and reform. In this article, Milliman’s Scott Weltz, Fritz Busch, and Nick Krienke highlight key policy discussions to monitor that will have a significant impact on individual health insurers.

This is the first in a series of papers Milliman will publish as the country contemplates another round of healthcare reform. We have also compiled a reading list of relevant papers from our ongoing analysis of the ACA. To view that library, click here.





What can be done to slow healthcare inflation?

Weltz-ScottMany initiatives have been put forth to limit the rise of healthcare costs. Here I discuss some of those initiatives while using key figures from the 2016 Milliman Medical Index (MMI) as a backdrop to help better understand how each one fits into the complicated puzzle of managing healthcare costs while delivering high-quality care for the MMI’s family of four.

Consumerism
With the family of four spending over $11,000 between its payroll deduction for health insurance and average out-of-pocket expenses at the point of care, it is easy to see why consumers are hungry for actionable information to inform healthcare purchasing decisions. However, it is not as simple as supplying a price list of medical services, given the variations in payment and treatment patterns. In addition, as pointed out earlier, the people who consume most healthcare dollars reach their out-of-pocket maximums and thus have little financial incentive to be savvy consumers. As a result, some other concepts are gaining traction to address these issues.

Value-based insurance (VBI)
What is it? This is a term that means different things to different people. In health insurance, it usually refers to benefit plan designs that encourage behavior that keeps patients healthy. VBI includes things like reducing deductibles or copays for patients who follow a defined plan of care or have a certain disease. Sometimes VBI simply revolves around granting lower employee contribution rates for those who join an employer’s wellness plan.

Opportunities and challenges. Some VBI initiatives are focused on that small portion of the population driving the majority of the cost. Incentives are often put in place to encourage changes in consumer behavior, such as $0 copays for prescriptions that treat a chronic condition. In turn, the expectation is that an investment like this will result in better management of conditions, fewer inpatient admissions or emergency room (ER) visits, lower costs, and better health outcomes. However, these programs must be carefully designed to avoid simply increasing costs. The hope is that proactively taking these actions will curb long-term trends by improving treatment and limiting the onset of preventable conditions.

MMI2016_figure4Defined contribution
What is it? Employers typically subsidize the cost of coverage. As Figure 4 from the MMI shows, employers are subsidizing approximately 57% of the cost for the family of four. While the MMI focuses on typical PPO coverage, many employers offer other plans such as high-deductible health plans (HDHPs) or sometimes health maintenance organizations (HMOs). Offering multiple benefit plan choices creates financial risks for employers, varying with how much they subsidize each plan and the number of employees that enroll in each plan. To mitigate this risk, many employers are defining their subsidies via a defined contribution to the plan. Then employees simply pay the difference between the premium of their chosen plans and the employer’s defined contribution.

Opportunities and challenges. Offering multiple health plan options can encourage employees to enroll in plans that incentivize appropriate consumption of healthcare services. However, these plan options can be less attractive to many employees. In addition, employers know all too well that offering more choices brings with it more costs from administrative complexities and adverse selection as employees choose the plans that minimize their own costs (while increasing the employer’s costs). These challenges are getting more attention in the market as employers begin to question the value proposition of private exchanges, which often use defined contribution approaches. Until such challenges are addressed, it is difficult to say whether the movement to defined contribution will meaningfully reduce costs or simply continue cost shifting to employees. Although Figure 5 from the MMI only shows five years of changes, 2016 actually marks the sixth consecutive year of such cost shifting, whereby employees’ share of the MMI has increased.

MMI2016_figure5

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