• Healthcare costs are scary

    The 2012 Milliman Medical Index is out:

    The annual Milliman Medical Index (MMI) measures the total cost of healthcare for a typical family of four covered by a preferred provider plan (PPO). The 2012 MMI cost is $20,728, an increase of$1335 or 6.9% over 2011. The rate of increase is not as high as in the past, but the total dollar increase was still a record. this is the first year the average cost of healthcare for the typical American family of four has surpassed $20.000.

    If that number seems high, it’s because many of the costs are hidden from view. For instance, your employer is footing about $12,144. But that’s still money that would likely have gone to you otherwise. Then, employees kick in another $5114 in contributions. But those might come out of your paycheck before you get it, so again, the cost is hidden. What the typical family of four definitely sees is the $3470 in out of pocket costs each year.

    On the spending side, that family’s spending goes mostly to physicians ($6647) and inpatient care ($6531). The rest goes to outpatient care ($3699) and pharmacy costs ($3056), leaving $795 for “other”. The amount spent in each category has gone up every year for the last five years.

    And what will the PPACA do about this? (emphasis mine)

    While several aspects of healthcare reform would have meaningful impact on the cost of insurance coverage, the effect on the total cost of care is very limited for our family of four. For example, medical loss ratio rules and stringent review of health insurance increases may reduce insurer profits and also put pressure on insurers to be as efficient and low-cost as possible. But the cost of care for this family of four is still $20,728, which excludes insurer profits and administrative expenses.

    While efforts to be more administratively efficient may lead to lower premiums, they do not directly affect the cost of delivering healthcare to the MMI family of four.

    What will it take to significantly affect the cost of care? Some of the movements already under way may help. Examples include better care coordination, a focus on outcomes and efficiency, increased patient accountability, and healthier lifestyle choices.

    Whether the nation is next debating new legislation from scratch or next steps to take us beyond the financing issues of PPACA to meaningful cost reforms, the amounts at stake will not go unnoticed.

    The PPACA is not enough. We need more, not less.


    • The index we should be publishing is the medical cost vs GDP growth index.


      • Though it is important to recognize that, these days, economic growth is not equally shared. For example, my health care costs go up faster than my income. Maybe the 1% don’t have that problem.

    • Thanks for citing a very interesting site on health care costs.

      It should be noted that in 2008 the cost was about $15,000 and now it is $20,000. Yes the growth rate has declined, but the fact that the average cost for a family of four is over $20,000.00 should be a wake-up call to everyone that just tinkering with the system will not do. The economic structure of health care delivery must either be changed, or the costs will continue to escalate, ultimately reducing consumption in other areas and driving the U. S. economy into a sustained period of low or zero growth.

      It should also be noted that the Republican plan is to shift more of this cost from the employer/government to the family. The theory is that consumers will drive costs down if they have more of the burden. Does anyone believe that, and if so can they enlighten the rest of us as to how that would work?

    • Where is the White House’s promised savings of $2,000+ per family under PPACA?

      The Milliman cost increase was ~33% over the past 4 years (from $15,609 to $20,728) – an average annual increase of about 7.35%, which is actually lower than the “typical trend” (if there is such a thing) over the preceeding two-three decades.

      However, using that same 7.35% rate over the next 7 years leaves us with a 2019, post-PPACA implementation family medical coverage cost of ~$34,000! So, is the promised savings a $2,000 reduction from what would have been $36,000? Hey, that’s great…


    • This is what makes the concept of single payer so daunting, even though it makes sense on so many levels.

      The clear inference from this data is Americ’a doctors, hospitals, and drug companies receive about $1 trillion in revenue from the non-Medicare, non-Medicaid, non-military, non-prison population. (about 200 million persons, or 50 million theoretical families)

      A single payer plan would also have to delivery one trillion in revenue or it will be scuttled by providers.

      Total American wage income is about 6 trillion. There is another 2 trillion in pensions, dividends, rents. etc.

      So what is needed for single payer would be a new payroll tax of 16 per cent, or a new income tax of 12 percent, or a new VAT of 10 percent, or some combination.

      Now these percentages are VERY close to what is paid by the Germans, French, and Canadians for health care. (their taxes may not all be visible, but they add up)

      So we could afford Single Payer. Yet how we would get there politically is hard for me to see. In America we have not raised the Medicare payroll tax percentage since 1990 — 22 years during mainly prosperity and the obvious aging of the baby boom. Going to a 16 per cent payroll tax seems off the charts for us.

    • Quoting from Aaron’s quote of the MMI: “What will it take to significantly affect the cost of care? Some of the movements already under way may help. Examples include better care coordination, a focus on outcomes and efficiency, increased patient accountability, and healthier lifestyle choices.”

      Here, here! I’m all for these measures, but I fear they are woefully inadequate. We also need the following policies in both private and public health care financing:

      1. Do not pay for treatment demonstrated to be ineffective.
      2. Do not pay even for effective treatment when there is an alternative that is both cheaper and equally effective.
      3. Do not pay even for effective treatment without an equally effective alternative when the cost is excessive. (Yes, we must debate what cost is excessive.)