Milliman is the country’s largest and perhaps best known actuarial firm. It annually calculates the total medical costs for a family of four enrolled in employer-sponsored health insurance. In 2010 that amount is projected to be $18,074, an increase of 7.8% over 2009. (Milliman Release) Hospital inpatient and outpatient costs accelerated, while other categories such as physician and pharmacy saw slower increases. This is consistent with a line of recent research indicating that hospitals are using their market power to raise costs across the system.
The employer picked up about $10,744 of the total cost, meaning the family paid over $7000 in the form of premium share and out-of-pocket costs like copays and deductibles and uncovered services. That is a lot of money, most of which is after-tax. Milliman believes that the employer will pick up most of the additional costs caused by reform and that employees will generally see few changes in benefits. That is at odds with the results of some surveys indicating that employers intend to respond to reform by either reducing coverage levels or shifting more cost to employees.
The average family cost varies across the country by as much as 35%. Hospital inpatient and outpatient is about 48% of total cost; physician services are 33% and drugs 15%. Hospital inpatient increases were 9.8%, almost all of which was unit price. Hospital outpatient grew 11.6%, again almost entirely due to unit price increases. The physician cost increased by 5.2%, less than the previous year’s growth rate. Most of this increase was also attributed to unit price. Pharmacy costs grew by 6.1%, 80% of which is due to unit price growth.
The most notable finding is obviously that health costs are rising much faster than economic growth or inflation and that growth is almost entirely due to unit price increases, increases which are unlikely to be caused by corresponding increases in providers’ cost of doing business. Sooner or later that has to be addressed if health spending is to be controlled.