Milliman, the large actuarial firm, does an annual report on how much is spent on health care for an average four-person American household enrolled in an employer-sponsored PPO plan (the Milliman Medical Index). The 2015 report indicates continued cost pressure. (Milliman Report) The estimated cost is $24,671, up from $23,215 in 2014. That is a 6.3% increase, compared to a 5.4% increase from 2013 to 2014, which was the lowest growth rate in the history of the Index. Since 2001, the Index has tripled. And the family is bearing an increasing share of the total cost; since 2015 the family share is up 43% to $10,473 a year, while the employer share rose 32%. Of that family spending, $6408 is premium share and $4065 is out-of-pocket health service cost-sharing. That continues a trend in which the family is picking up more of each year’s rise in health spending.
The largest categories of health spending are hospital inpatient and professional services, each at around 31% or $7500 per year. Drugs are about 16% of spending but grew at 15.6% in 2015, and almost all of that rise was due to unit price increases. While employers and health plans are very focussed on controlling drug spending, not much can be done about the costs of new specialty drugs or of generic drugs which are manufactured by multiple companies. As usual, drug companies figure out how to keep generating high profits. Hospital costs increased about 5.4%, again almost all due to price increases, as utilization growth is basically non-existent. Physician-service spending continues to show modest rises, 3.6% this year, again largely from price increases.
Milliman notes that one aspect of reform that may put even more pressure on families is the so-called “Cadillac” tax, or an excise tax on plans that have more than a certain value. Employers will likely respond to that tax by adopting plans with less rich benefits; i.e., more copays and deductibles. As Milliman also notes, health care is eating up a greater share of median household income; now up to almost 20%. With income growth at around 2% a year, that trend is going to continue. And we once again want to remind people that is not at all what the Administration promised when the reform law was passed; in fact, it said that costs were going to go down. So there is no reason at all to consider the reform act a success.