Family of 4 Healthcare costs tripled since 2001 – but 2015-2016 rise lowest increase yet
The average cost of care for a typical American family of four covered by an average employer-sponsored PPO has more than tripled from an average of $8,414 for a family of four in 2001, to the current average of $25,826 according to a report by the Milliman Medical Index.
While the percentage increase of 4.7% is the smallest yearly increase yet, it is still well above the increase in the Consumer Price Index (CPI) for medical services, and the 2% annual increase in median household income between 2004 and 2014. Primary drivers in the increase in spending are rapidly-fluctuating prescription drug – most notably “specialty” drug – costs, as well as “fee-for-service payment mechanisms,” inefficiencies in delivery systems, and efforts to improve longevity and quality of life through the use of new technologies as other factors influencing ongoing increases in costs. The authors of the report are careful to note that there as a “disconnect” between healthcare consumption and financing, and that 80% of healthcare costs come from just 20% of the population, whose use of medical services drive up insurance plan premiums for the rest.
Meanwhile, the MMI reports that health insurance has become less affordable at a time when it should be a critical component of a family’s financial security. Because the MMI does not measure premiums, any effect of the Affordable Care Act, also known as Obamacare, is negligible, and it is unclear whether the ACA played a role in the slowing of the rate over the past five years.
Besides reporting on the most recent cost increases, the MMI also takes care to identify steps that can be taken to slow healthcare inflation, and identifies the opportunities and challenges for each. Recommendations include using Value-based insurance (VBI) plans, and integrating delivery of healthcare through the use of narrow networks, telemedicine, and provider payment reform, and better utilization of electronic health records (ERH) and big data.