Milliman Medical Index 2005
Milliman Inc.
Milliman Inc. has completed its first annual study of the total annual medical costs for a “Typical American Family of Four.” The Milliman Medical Index (MMI) measures the average spending by such a family if covered by an employer-sponsored PPO program.
Based on a typical PPO plan design, Milliman estimates that out of the $12,214 total medical costs for 2005, a family would pay $2,035 out of their own pocket through member cost-sharing.
Future trends, including consumer-driven health plans:
As total medical costs continue to rise, employers will continue to look for ways to reduce costs, both for themselves and their employees. Employers are looking at ways to try to improve healthcare quality and reduce costs by sharing information aimed at educating their employees about the costs and efficacy of various medical services. Employers and health plans also continue to try to negotiate favorable rates with healthcare providers.
If these efforts are insufficient to keep employer cost trends at affordable levels, employers will continue to adjust employee contributions (both cost-sharing and premium sharing). While this has happened gradually in the recent past, some employers have concluded that this can only be done with a significant change in the traditional benefit plans being provided. This has led to increased interest in consumer-driven health plans (CDHPs), where members are given a spending account to pay for their own routine care, plus a high deductible plan to pay costs in catastrophic cases. Going from a traditional PPO plan to a high deductible plan can have a substantial impact on the portion of annual costs paid by the member through cost sharing,
A key question regarding CDHPs is whether they will result only in a shift of costs from the employer to the employee, or whether they will affect the total annual cost of healthcare.
http://www.milliman.com/mmi/Milliman_Medical_Index_Final.pdf
Comment: From the Milliman website: “One of the largest consulting and actuarial firms in the United States, we are recognized leaders who have helped shape significant changes in the markets we serve.”
When Milliman speaks, we listen. That doesn’t mean that we like what we hear.
This study reports that a typical family of four, enrolled in an employer-sponsored PPO pays $2,035 for out-of-pocket cost sharing of $12,214 in covered expenses. It is important to realize that the $2,035 does not include the employee’s contribution to the insurance premium, nor payments for non-covered products and services. When those are included, it is quite clear that average-income individuals would have difficulty affording the total out-of-pocket health care costs even though insured through the employer-sponsored PPO plan. Since PPO plans in the individual market are even less comprehensive, out-of-pocket expenses would be even more burdensome, not to mention the fact that the individual usually pays the full premium.
Also, since the study was limited to employer-sponsored PPO plans, the patient population is composed of relatively healthy, gainfully-employed individuals and their relatively healthy families. Just imagine the greater potential financial burden faced by those with more significant health care needs.
Thus the question posed by Milliman regarding the impact of the trend toward consumer driven health plans does not bode well for ensuring future affordable access to health care. In shifting more costs to the employees, either individuals will have the formidable task of reducing spending in other sectors of their already tight budgets, or, more likely, they will have to do without beneficial health care services.
Then, of course, in theory this could reduce total health care costs by motivating patients to reject unnecessary health care services. But first would someone show me all of those patients who are out seeking so much unnecessary care? I certainly don’t know who they are, or if they even really exist. When was the last time that you went to a doctor to try to obtain all of the unnecessary care that you could get?
