Tag Archives: Sue Hart

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.





More than $25,000?! How did we get here?

Hart, SueThe cost of healthcare for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) plan is now $25,826, according to the 2016 Milliman Medical Index (MMI). One question that comes to mind is “how did we get here?” The MMI excerpt below highlights an illustrative company with four employees to explain how healthcare costs may be spread across an employer’s population.

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In the example in Figure 3, our employer pays the same amount for each family, regardless of the family’s healthcare costs. Each employee also pays the same for his or her family in the form of payroll deduction. The averages paid by the employer and employee for all families are consistent with the components of the MMI shown in Figure 4 (see study); however, each family has very different healthcare expenditures.

• Family 1 uses limited health services—some preventive visits for which they pay nothing out-of-pocket and copays for prescription drugs and office visits.
• The second family is fairly healthy as well, with similar services, but their oldest child had a single visit to the emergency room (ER) and follow-up visits that cost $6,000, of which the family paid $964 out-of-pocket.
• Family 3 welcomed a new baby. Maternity care, a hospital stay, and newborn visits cost $22,000, of which the family’s out-of-pocket cost was $5,000.
• Last is Family 4: The father has a chronic condition that put him in the hospital once, along with multiple visits to the ER and physicians, and multiple prescriptions. The mother also has health issues and the resultant ongoing costs, including specialty drugs. The children have only routine healthcare services. The family’s costs were capped by an out-of-pocket limit of $11,000, but total expenditures were nearly $75,000.

On average, the total cost of care for all four of the example families is $25,826, which equals the 2016 MMI. And yet the variation among family costs is striking, with the most costly being 74 times the least costly. The range of amounts paid by the family through contributions to care and out-of-pocket costs is significantly tighter, with Family 1 paying about $7,000 and Family 4 paying about 2½ times that, at nearly $18,000. This lower difference in total costs among the four families is driven by the employee’s payroll deduction being based on the average cost of care for a family of four, along with plan design features that limit the family’s out-of-pocket payments.

While the above is only an illustration, it demonstrates the range of healthcare costs that different families may experience, and how those costs may be spread across the employer’s population. It also shows that employee financial incentives to consume healthcare efficiently are limited, which contributes to the rising costs. First, the majority of the healthcare cost is often paid by the employer rather than the employee. Second, first-dollar coverage and fixed-dollar copays insulate patients from the true cost of their care. For example, although patients might pay $150 to visit the ER, which could seem like a lot of money, they are often unaware that the ER’s total charges could be several thousand dollars. And last, those with more extensive health issues may hit their out-of-pocket maximums and have limited incentives to avoid additional costs.





Healthcare costs for a typical American family will exceed $25,000 in 2016 and have tripled since 2001

Milliman today released the 2016 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 2016, costs for this family will increase by 4.7%—the lowest rate of increase in the history of this study—though the total dollar increase of $1,155 marks the 11th consecutive year that the total dollar increase has exceeded $1,100. The employer pays $14,793 of the total healthcare costs and the employee—through payroll deductions and cost sharing at the time of service—pays $11,033.

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“The MMI surpassed $25,000 this year, a significant and somewhat unsettling milestone,” said Chris Girod, coauthor of the Milliman Medical Index. “Given the steep cost increases we’ve seen in the 15 years we’ve been studying healthcare costs for the typical American family, in this year’s report we reflect on how we got to this point and where we go from here.”

Healthcare cost trends have exceeded the consumer price index (CPI) in every year since Milliman published its first MMI in 2001. Healthcare has represented an increasing share of the national GDP. With an average of 7.8% in annual increases, the MMI has more than tripled in 15 years.

Most of the components of care analyzed by the MMI (physician, outpatient, inpatient, other) experienced trends in line with recent years, and overall the annual medical cost increase has ramped down from more than 9% in 2001 to less than 4% this year. But cost changes related to prescription drug coverage have been more volatile, with drugs becoming a larger portion of family healthcare expenditures—this year reaching 17% of their total. While that number requires a caveat—it does not include prescription drug manufacturer rebates that employers may receive for specialty and other high-cost drugs—it also points to the increasingly important role that drug costs play in a family’s cost of care.

MMI2016_figure2_blog_600

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, and it separates the costs into portions paid by employer versus employee.

“Back in 2001, the first year we measured the MMI, employers paid 61% of costs while employees paid 39%. In 2016, the same split is 57% and 43%,” said Sue Hart, coauthor of the MMI. “This year, the family’s share of healthcare costs reached $11,033 out of a total of $25,826. It’s evident that employees are taking on an increasing proportion of healthcare costs. ”

“The steady decline in annual cost trends over the 15 years we’ve tracked the MMI provides a ray of hope,” said Scott Weltz, coauthor of the MMI. “Hopefully the current and future efforts to control costs will continue this trend.”





ACA’s influence on the large employer market

Hart, SueLast year’s Milliman Medical Index (MMI) report noted that emerging reforms required by the Patient Protection and Affordable Care Act (ACA) had yet to show material direct impact on the cost of care for our family of four because this family is often insured through large group health plans. Some of the most far-reaching ACA reforms are focused on access to insurance in the individual and small employer markets and have more immediate impacts on premium rates in those markets. While this modest impact continues in 2015, there are a number of influences that the ACA may have on costs in the large employer market over the next few years. Some of these influences will directly affect the large employer market—the Cadillac tax is the most visible such change—while others may be indirect, with spillover from provisions in other markets driving change in the large employer market.

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