Healthcare costs top grocery bill for average family

Milliman released its 2013 Milliman Medical Index (MMI) and reported healthcare costs for the typical family of four in the U.S. reached $22,030, a 6.3 increase over 2012. To put the costs in perspective, Milliman noted total healthcare costs are on par with college tuition at an in-state public school.

Family payroll deductions and out-of-pocket costs are comprised of $5,544 in employee payroll deductions and $3,600 in out-of-pocket spending for a total of $9,144, which is more than the typical family spends on groceries.

The MMI is based on a hypothetical family of a male, age 47; female, age 37; and two children, ages 4 and less than 1 year of age.

The $22,030 figure refers to the annual healthcare for a family of four covered by an employer-sponsored preferred provider plan (PPO), with the family responsible for 41 cents of every dollar spent, according to Milliman.

Costs have steadily increased over the last five years, from $16,771 in 2009 to $22,030 in 2013. However, the family has been hit by a larger percentage of cost increases than the employer.

The 6.3 percent jump in costs from 2012 to 2013 represents the smallest increase in the last five years, a signal that the U.S. may be bending the cost curve, according to Milliman. The slowing rate of growth may be related to several possibilities:

• The recession, coupled with greater cost-sharing, may have dampened demand;
• Increased provider integration and sharing of healthcare data via EHRs may have resulted in enhanced efficiencies; and
• The small number of blockbuster drugs did not offset the increased use of generic drugs.

Healthcare costs fall into five categories: inpatient care, outpatient care, professional services, pharmacy and other.

The lower rate of growth in inpatient care, at 5 percent, was offset by a 9.2 percent growth rate in outpatient services such as emergency care, outpatient surgery and radiology. “We have been seeing a continued, gradual shift of services from an inpatient setting to an outpatient setting, resulting in higher outpatient trends and lower inpatient trends.”

Although employers paid an average of 59 percent of total healthcare costs in 2013, employees’ share of costs has outpaced employers’ for five of the last six years. Employer shifting of premiums to employees and higher co-pays may be driving this trend, according to Milliman. Still, employers are attempting to keep costs manageable.

“More and more, employers are looking at plan designs and delivery system arrangements that can reduce the total cost of care being provided rather than just having employees absorb more of the premium via payroll deductions and/or higher copays and deductibles.”

Finally, Milliman noted the uncertain impact of healthcare reform on the typical family. That’s because the family is likely covered by a large group plan. The family realizes only indirect and mixed effects on the cost of care stemming from expanded coverage, improved price transparency, new taxes and fees and cost shifting related to reductions in uncompensated care.

Healthcare price transparency, according to Milliman, could curb the growth in healthcare costs by fostering a conversation about the disconnect between cost and value. “Consumers and providers need to better understand the cost of healthcare services being provided, as well as the other options and alternatives available to them. These efforts could help empower consumers to play a stronger role in getting healthcare costs under control.”

To access the full report, click here.