2014 Milliman Medical Index

Milliman is a large actuarial firm and it tracks growth in medical costs for a typical family via the Milliman Medical Index.  The 2014 version is out.   (Milliman Index)   About $23,215 will be spent in 2014 for an American family of four covered by an employer-based health plan.  The rate of change from 2013, at 5.4%, is lower than any rate of growth since 2002, but is still far higher than GDP or personal income growth.  And these costs have doubled in the past ten years, placing an extraordinary burden on companies and employees.  Employers pay 58% of this total, or $13,520; meaning that employees bear the remaining 42%, or almost $10,000 per year per family.  Comparatively since 2007, employers’ spending has grown 52% while employees’ has risen 73%, indicative of the continuing shift of costs to workers.  Of the workers’ share, about 26% is in the form of premium contributions and 16% is due to out-of-pocket spending such as copays and deductibles.  Employees saw a 6.6% increase in premium-sharing and a 5.2% rise in out-of-pocket expenses, for an overall growth of 6% in their spending.  Employers experienced a 4.9% rise in their share of the total spending.

By category, physician and other professional services are 31% of spending, hospital inpatient is 31%, hospital outpatient is 19% and prescription drugs are 15%.  Inpatient costs grew 5.7%, while utilization rose slightly.  Hospital outpatient costs rose 8%, while physician services rose only 4.1% and drug spending 4.5%.   So the biggest spending growth problem is clearly located at hospitals right now.  The Milliman index assumes a typical PPO plan for coverage, but this year the firm began to look at what might be different with a high-deductible plan.  As would be expected, out-of-pocket costs are higher, but premium contributions are lower, and the total cost of care is likely reduced as well.  Milliman identifies a number of factors which cause slowing growth, including the continued weak economy, increased pressure on providers to control costs and increased consumer exposure to and sensitivity about their increasing share of health care spending.  In the future, economic changes may accelerate the rate of growth, as could expansion of coverage under the reform law.  Specialty drugs are a category that bears special watching.  And the effect of competition through insurance exchanges is uncertain.