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HCR Update: Report Shows Families Pay More; Breast Cancer Provisionsm etc.

Jun 03, 2010

Health Care Reform Update

See what the 2010 Milliman Medical Index reveals about a typical family's health care costs and the underlying costs associated with it.

New report shows families paying more for health care, underlying costs at issue

The 2010 Milliman Medical Index (MMI)* has been released and shows that American families are paying more for their health care. The total medical cost for a typical family of four is $18,074 in 2010. That's about $1,300 more than 2009. This is the highest dollar increase seen in the last 10 years since the index was created. While there are many factors to consider, the report reveals that these rising costs are largely driven by increases in the underlying costs of care.  

According to the report, "most of the hospital and physician cost increases identified in this year's MMI have been driven by average unit cost, not utilization, which frames the effort to control costs." Average unit cost reflects the negotiated charge for each service, as well as the mix of services delivered. This may be one reason the report suggests that "provider/payor negotiations will be more visible and intense in the reform environment and as regulators put more pressure on the premium rate-setting process."  

Here are other key findings and observations:  

£     This year, there was an increase in cost trend for inpatient and outpatient facilities, and a decrease in cost trend for physician, pharmacy and other services.

o     Inpatient and outpatient facility services combined represent 48% of total annual medical costs vs. 47% in 2009. 

o     The largest dollar increase this year was for inpatient facility care, which increased by $498.

o     The 2009 to 2010 hospital inpatient annual rate of increase grew from 7.7% to 9.8%; most of the inpatient annual rate of increase is driven by "average unit costs."

o     Although physician costs are the largest component of the overall health care cost pie, their 2010 annual rate of increase is lower than that of other health care costs components. 

£     There is large variation in health care costs across geographic regions. Costs vary from low to high by more than 35%, with the lower-cost areas generally being in the West and across some parts of the South.

£     At $10,744, the average employer's share of the cost nationwide for the typical family of four now surpasses $10,000 for the first time. 

£     With reform now in place, some short-term reforms may shift costs further from employees to employers.

£     Despite passage of federal health reform, the underlying drivers of increasing health care costs are not expected to immediately change.   

For more details, take a look at the 2010 Milliman Medical Index.

What we're doing to help control costs

To address the underlying costs of health care, we're maintaining a focus on improving access to health care quality, which can help manage costs. Here are some of the things we're doing now:

£     Promoting quality through clinical performance measurement, pay-for-performance incentives, and Quality Hospital Insights Programs

£     Expanding programs that identify high-quality providers in certain areas to cover more treatment categories

£     Helping members make more informed decisions through tools that compare cost and quality, allowing members to share physician-patient experiences, and more

£     Developing consumer-directed health care plans

£     Helping providers by offering clinical and administrative information electronically

£     Monitoring and measuring members' health improvement though the member health index

£     Participating in the "patient charter" initiative that establishes guiding principles for physician performance measurement and focusing on nationally recognized quality metrics 

*The Milliman Medical Index is published annually by the respected global actuarial and consulting firm Milliman Inc. to report total annual medical spending for a typical American family of four covered by an employer-sponsored PPO. The MMI looks at key components of medical costs and charts the changes in these components over time, including cost changes for employers and employees. The MMI also includes results for 14 major American metropolitan areas to demonstrate the variance in medical costs by region.


This Week in Health Care Reform: May 28, 2010  

With health care reform legislation barely 2 months old, Americans continue to express dissatisfaction with the new law. As some state lawmakers push to opt out of the federal requirements, recent national polling continues to show Americans strongly favor the law's repeal. 

As the health care reform legislation continues to take shape this year, we encourage you and others to engage members of Congress by visiting the Health Action Network.  

Health Care Reform 

WellPoint to Implement Key Provisions of the Breast Cancer Patient Protection Act:

WellPoint announced Wednesday that its affiliated health plans will unilaterally implement key provisions of the Breast Cancer Patient Protection Act introduced by Rep. Rosa DeLauro (D-Conn.). The new provisions include more transparent benefit language, including clear explanations of benefits to members with breast cancer and standardized clinical guidelines for women recovering from mastectomy to offer a voluntary 48 hours minimum in-hospital stay. 

New Study Shows Not Enough Money in High-Risk Pools: A new report released Thursday reveals the new health care law does not allocate appropriate funds to cover the more than 5.6 million Americans with pre-existing conditions. The analysis by the Center for Studying Health System Change found that the $5 billion earmarked for these high-risk insurance pools could cover as few as 200,000 people a year. 

Large Companies Expect Health Care Costs to Rise: According to benefits consultant company Towers Watson, most executives at the nation's largest companies believe the health care reform law will raise costs, forcing them to reduce coverage to make up the difference. The benefits consultant companysurveyed executives at 661 companies and found that 94% of them share this belief. Eighty-eight percent plan to pass those increases on to their employees, while 74% anticipate reducing health care benefits and programs. Nearly 75% of respondents said they plan to continue offering subsidized coverage to active employees. 

Administration Files Motion in Virginia Federal Court: On Monday, Health and Human Services Secretary Kathleen Sebelius asked a federal judge in Virginia to dismiss the state's lawsuit alleging that Congress overstepped its constitutional bounds with the new health care reform law. This action is the first by an administration official in response to the court challenges initiated by various states across the country.  

Oklahoma Sends Measure to Secretary of State: On Tuesday, members of the Oklahoma House of Representatives approved a joint resolution giving voters a chance to vote on a constitutional amendment allowing them to opt out of the new health care reform law. The resolution, which would render any law unconstitutional that requires a person, employer or health care provider to participate in any health care system, has been sent to the secretary of state to be placed on the November 2 ballot 

Public Opinion 

Americans' Demand for Repeal Skyrockets: According to a newly released Rasmussen report, 63% of Americans now favor repealing the health care reform legislation. That number is up 7 points since last week and represents the largest increase in public support for repeal since the legislation became law in March of this year.  

Americans Still Unhappy with Health Care Reform: According to a recent CBS News poll, 47% of Americans still disapprove of the new health care reform law. Further, 36% of Americans think the law will hurt, rather than help them.  

Looking Ahead 

After a weeklong Memorial Day recess, lawmakers will return to Washington, D.C., on June 7 to begin the final legislative push leading up to the November midterm elections.  

This content is provided solely for informational purposes: it is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisors.

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