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.