2009 Milliman Medical Index

Milliman, Inc.
May 2009
The fifth annual Milliman Medical Index (MMI) measures average annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program.
The total 2009 medical cost for a typical American family of four is $16,771.
http://www.milliman.com/expertise/healthcare/products-tools/mmi/pdfs/milliman-medical-index-2009.pdf

The Milliman Medical Index (MMI) provides us with a very important measure of health care spending in the United States. For 2009, average annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program is $16,771. That number should be front and center in our national dialogue on reform. It is important that we understand what it means.
Over 160 million of us receive our health care coverage through an employer. This sector is the healthy workforce and their young healthy families. This is the largest and least expensive sector to insure. It is the sector that we have presented to the private insurance industry either to insure risk or to provide administrative services for self-insured employers.
Group insurance wastes less on non-medical services than does insurance for individuals or small employers. So between the greater efficiency of employer-sponsored plans, and the low-cost, healthy status of the population insured, the spending on this group (represented by the MMI) shows us the best value that we can expect under our current multi-payer system of financing care.
The MMI is nominally broken down into an employer contribution ($9,947), an employee contribution ($4,004), and employee out-of-pocket costs ($2,820). But virtually all economists agree that the employer contribution is paid by the employee in the form of forgone wage increases. So the entire $16,771 represents the average health care costs for a family of four covered by an employer-sponsored PPO. That is what the average family is actually paying today.
Since this is average, those families with greater medical expenses are actually paying more in out-of-pocket costs. So reform proposals need to take into consideration not only the average $16,771 per family, but also the additional costs for those families with greater health care needs.
It is also important to understand that that the combined employer and employee contributions ($9,947 + $4,004 = $13,951) do not represent the premiums paid. Although the average family is defined as a family with an employer-sponsored PPO, the PPO reflects only the fact that the health care system provided discounts for the care provided. The employer and employee contributions represent the actual payments made for health care (minus the out-of-pocket spending). The MMI specifically excludes the non-medical administrative component of health plan premiums.
Read that again. The MMI ($16,771) represents the actual payments to the health care delivery system and excludes the funds retained by the insurance industry for administrative costs and profits.
Many in the policy community believe that health care costs that exceed 10 percent of family income create a financial hardship for that family. Based on the MMI, the average family with an employer-sponsored PPO would have to have an income of $167,710, though adding the administrative costs of private plans plus any additional out-of-pocket spending that might be required would drive that income threshold further upward.
The 2007 median household income was $50,233. Although that does not represent precisely the family of four with employer-sponsored coverage, it does give us a rough perspective of why the numbers no longer work. Any effective reform proposal based on private plans would have to provide taxpayer-financed subsidies for a typical family with an income below $167,000, plus additional subsidies for administrative costs, and even more subsidies for larger than average health care spending. That means that almost the entire workforce would require subsidies.
So what does the MMI tell us? Only an idiot would isolate the largest and healthiest sector of society into the collective employer-sponsored risk pools, assign a package of benefits to each family, assess contributions to be paid based on that package, shift all non-benefit costs to that family, add a hidden charge for wasteful administrative services, and still leave many families exposed to financial hardship. What does that say for those members of Congress who are hashing out this model of health care reform behind those closed doors?
We need a health care financing system that is funded equitably, based on ability to pay, and that uses the power of our own public monopsony to be certain that each of us receives the care that we need. The MMI tells us that it’s time to enact a single payer national health program.

Milliman, Inc.
May 2009

The fifth annual Milliman Medical Index (MMI) measures average annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program.

The total 2009 medical cost for a typical American family of four is $16,771.

http://www.milliman.com/expertise/healthcare/products-tools/mmi/pdfs/milliman-medical-index-2009.pdf

Comment:

By Don McCanne, MD

The Milliman Medical Index (MMI) provides us with a very important measure of health care spending in the United States. For 2009, average annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program is $16,771. That number should be front and center in our national dialogue on reform. It is important that we understand what it means.

Over 160 million of us receive our health care coverage through an employer. This sector is the healthy workforce and their young healthy families. This is the largest and least expensive sector to insure. It is the sector that we have presented to the private insurance industry either to insure risk or to provide administrative services for self-insured employers.

Group insurance wastes less on non-medical services than does insurance for individuals or small employers. So between the greater efficiency of employer-sponsored plans, and the low-cost, healthy status of the population insured, the spending on this group (represented by the MMI) shows us the best value that we can expect under our current multi-payer system of financing care.

The MMI is nominally broken down into an employer contribution ($9,947), an employee contribution ($4,004), and employee out-of-pocket costs ($2,820). But virtually all economists agree that the employer contribution is paid by the employee in the form of forgone wage increases. So the entire $16,771 represents the average health care costs for a family of four covered by an employer-sponsored PPO. That is what the average family is actually paying today.

Since this is average, those families with greater medical expenses are actually paying more in out-of-pocket costs. So reform proposals need to take into consideration not only the average $16,771 per family, but also the additional costs for those families with greater health care needs.

It is also important to understand that that the combined employer and employee contributions ($9,947 + $4,004 = $13,951) do not represent the premiums paid. Although the average family is defined as a family with an employer-sponsored PPO, the PPO reflects only the fact that the health care system provided discounts for the care provided. The employer and employee contributions represent the actual payments made for health care (minus the out-of-pocket spending). The MMI specifically excludes the non-medical administrative component of health plan premiums.

Read that again. The MMI ($16,771) represents the actual payments to the health care delivery system and excludes the funds retained by the insurance industry for administrative costs and profits.

Many in the policy community believe that health care costs that exceed 10 percent of family income create a financial hardship for that family. Based on the MMI, the average family with an employer-sponsored PPO would have to have an income of $167,710, though adding the administrative costs of private plans plus any additional out-of-pocket spending that might be required would drive that income threshold further upward.

The 2007 median household income was $50,233. Although that does not represent precisely the family of four with employer-sponsored coverage, it does give us a rough perspective of why the numbers no longer work. Any effective reform proposal based on private plans would have to provide taxpayer-financed subsidies for a typical family with an income below $167,000, plus additional subsidies for administrative costs, and even more subsidies for larger than average health care spending. That means that almost the entire workforce would require subsidies.

So what does the MMI tell us? Only an idiot would isolate the largest and healthiest sector of society into the collective employer-sponsored risk pools, assign a package of benefits to each family, assess contributions to be paid based on that package, shift all non-benefit costs to that family, add a hidden charge for wasteful administrative services, and still leave many families exposed to financial hardship. What does that say for those members of Congress who are hashing out this model of health care reform behind those closed doors?

We need a health care financing system that is funded equitably, based on ability to pay, and that uses the power of our own public monopsony to be certain that each of us receives the care that we need. The MMI tells us that it’s time to enact a single payer national health program.

Senators Coburn, Burr and Representatives Ryan, Nunes Offer A Better Path Forward on Health Care Reform

Senator Tom Coburn, M.D.
May 20, 2009
Earlier today, U.S. Senators Tom Coburn, M.D. (R-OK) and Richard Burr (R-NC) and U.S. Representatives Paul Ryan (R-WI) and Devin Nunes (R-CA) introduced health care reform legislation that delivers on the shared principles of promoting universal access to quality, affordable health care, and does so without adding billions of dollars in new debt or taxes.
“The Patients’ Choice Act of 2009,” transforms health care in America by strengthening the relationship between the patient and the doctor; using choice and competition rather than rationing and restrictions to contain costs; and ensuring universal, affordable health care for all Americans. “The Patients’ Choice Act” promotes innovative, State-based solutions, along with fundamental reforms in the tax code, to give every American, regardless of employment status, age, or health condition, the ability and the resources to purchase health insurance. The comprehensive legislation includes concrete prevention and transparency initiatives, long overdue reforms to Medicare and Medicaid, investments in wellness programs and health IT, and more.
http://coburn.senate.gov/public/index.cfm?FuseAction=HealthCareReform.Home&ContentRecord_id=5e3b30a4-802a-23ad-4b44-14f0219114c6

And…

The Patients’ Choice Act

May 2009
The Patients’ Choice Act transforms health care in America: strengthening the relationship between the patient and the doctor; using the forces of choice and competition rather than rationing and restrictions to contain costs; and ensuring universal, affordable health care for all Americans.
The Patient’s Choice Act of 2009 would encourage states to establish rational and reasonable consumer protections, including the following:
* Creates State Health Insurance Exchanges to give Americans a one-stop marketplace to compare different health insurance policies and select the one that meets their unique needs
* Gives Americans the same standard health benefits as Members of Congress, so all Americans have a wide range of choices
* Protects the most vulnerable Americans to ensure that no individual would be turned down by a participating Exchange insurers based on age or health
* Creates a non-profit, independent board to risk adjust among participating insurance companies to penalize companies that “cherry pick” health patients and reward insurers that encourage prevention/wellness and cover patients with pre-existing conditions
* Expands coverage through auto-enrollment at state and medical points of service, for individuals who do not select a plan at the beginning of the year
* Gives states the ability to band together in regional pooling arrangements, as well as the creation of robust high risk pools, reinsurance markets, or risk adjustment mechanisms to cover those deemed ‘uninsurable’
The Patients’ Choice Act of 2009 would restore fairness in the tax code and give every American, regardless of employment status, the ability to purchase health insurance by:
* Providing an advanceable and refundable tax credit of $2,300 per individual or $5,700 per family
Brief summary:
http://coburn.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=b8876db7-2be0-4c84-b833-3d77dc4afa83
“Comprehensive” summary:
http://coburn.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=d4eab376-d507-4fb9-9f17-8b479a10affc

“The Patients’ Choice Act of 2009” is one of two Republican proposals for health care reform being released today and is considered to be the more conservative version. (The other, “The Medical Rights Act,” is being introduced by the “Tuesday Group” of centrist Republicans in the House, though their report has not been released as of this moment.)
So what do the conservative Republicans propose? They recommend state health insurance exchanges that offer the same benefits as members of Congress receive, with guaranteed issue, with risk adjustment between participating insurance companies, and with auto-enrollment but with the ability to opt out (not unlike an individual mandate with a process to opt out because of a lack of affordability).
There is something more than just vaguely familiar here. Of course! It’s the Democrats’ plan!
In the ultimate of ironies, the Democrats abandoned any consideration of the golden standard for reform, a single payer national health program, and sat down to begin negotiations right in the middle of the conservative wing of the Republican members of Congress. That might provide us with a piece of legislation, but it will never provide us with the health care reform that we desperately need.
(But tread lightly. According to Roll Call this morning, “Top aides to Senate Finance Chairman Max Baucus ( D-Mont.) held a private meeting on Monday with a bloc of prominent Democratic lobbyists, warning them to hold their fire or be left out of negotiations on President Barack Obama’s No. 1 legislative priority.”)
Update: The centrist “Medical Rights Act” has now been released. Rather than being a centrist reform proposal, it is merely worthless libertarian rhetoric:
http://www.house.gov/list/press/il10_kirk/healthcare_release.html

Senator Tom Coburn, M.D.
May 20, 2009

Earlier today, U.S. Senators Tom Coburn, M.D. (R-OK) and Richard Burr (R-NC) and U.S. Representatives Paul Ryan (R-WI) and Devin Nunes (R-CA) introduced health care reform legislation that delivers on the shared principles of promoting universal access to quality, affordable health care, and does so without adding billions of dollars in new debt or taxes.

“The Patients’ Choice Act of 2009,” transforms health care in America by strengthening the relationship between the patient and the doctor; using choice and competition rather than rationing and restrictions to contain costs; and ensuring universal, affordable health care for all Americans. “The Patients’ Choice Act” promotes innovative, State-based solutions, along with fundamental reforms in the tax code, to give every American, regardless of employment status, age, or health condition, the ability and the resources to purchase health insurance. The comprehensive legislation includes concrete prevention and transparency initiatives, long overdue reforms to Medicare and Medicaid, investments in wellness programs and health IT, and more.

http://coburn.senate.gov/public/index.cfm?FuseAction=HealthCareReform.Home&ContentRecord_id=5e3b30a4-802a-23ad-4b44-14f0219114c6

And…

The Patients’ Choice Act

May 2009

The Patients’ Choice Act transforms health care in America: strengthening the relationship between the patient and the doctor; using the forces of choice and competition rather than rationing and restrictions to contain costs; and ensuring universal, affordable health care for all Americans.

The Patient’s Choice Act of 2009 would encourage states to establish rational and reasonable consumer protections, including the following:

* Creates State Health Insurance Exchanges to give Americans a one-stop marketplace to compare different health insurance policies and select the one that meets their unique needs

* Gives Americans the same standard health benefits as Members of Congress, so all Americans have a wide range of choices

* Protects the most vulnerable Americans to ensure that no individual would be turned down by a participating Exchange insurers based on age or health

* Creates a non-profit, independent board to risk adjust among participating insurance companies to penalize companies that “cherry pick” health patients and reward insurers that encourage prevention/wellness and cover patients with pre-existing conditions

* Expands coverage through auto-enrollment at state and medical points of service, for individuals who do not select a plan at the beginning of the year

* Gives states the ability to band together in regional pooling arrangements, as well as the creation of robust high risk pools, reinsurance markets, or risk adjustment mechanisms to cover those deemed ‘uninsurable’

The Patients’ Choice Act of 2009 would restore fairness in the tax code and give every American, regardless of employment status, the ability to purchase health insurance by:

* Providing an advanceable and refundable tax credit of $2,300 per individual or $5,700 per family

Brief summary:
http://coburn.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=b8876db7-2be0-4c84-b833-3d77dc4afa83

“Comprehensive” summary:
http://coburn.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=d4eab376-d507-4fb9-9f17-8b479a10affc

Comment:

By Don McCanne, MD

“The Patients’ Choice Act of 2009” is one of two Republican proposals for health care reform being released today and is considered to be the more conservative version. (The other, “The Medical Rights Act,” is being introduced by the “Tuesday Group” of centrist Republicans in the House, though their report has not been released as of this moment.)

So what do the conservative Republicans propose? They recommend state health insurance exchanges that offer the same benefits as members of Congress receive, with guaranteed issue, with risk adjustment between participating insurance companies, and with auto-enrollment but with the ability to opt out (not unlike an individual mandate with a process to opt out because of a lack of affordability).

There is something more than just vaguely familiar here. Of course! It’s the Democrats’ plan!

In the ultimate of ironies, the Democrats abandoned any consideration of the golden standard for reform, a single payer national health program, and sat down to begin negotiations right in the middle of the conservative wing of the Republican members of Congress. That might provide us with a piece of legislation, but it will never provide us with the health care reform that we desperately need.

(But tread lightly. According to Roll Call this morning, “Top aides to Senate Finance Chairman Max Baucus ( D-Mont.) held a private meeting on Monday with a bloc of prominent Democratic lobbyists, warning them to hold their fire or be left out of negotiations on President Barack Obama’s No. 1 legislative priority.”)

Update: The centrist “Medical Rights Act” has now been released. Rather than being a centrist reform proposal, it is merely worthless libertarian rhetoric:
http://www.house.gov/list/press/il10_kirk/healthcare_release.html