Julie Miller
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Two weeks ago, Milliman released its 2009 Medical Index research report. Your initial takeaway point might be the total increase
in medical costs from 2008 to 2009, which Milliman calculates to be 7.4%—not a huge surprise, and pretty close to last year.
Hopefully you haven't become too desensitized to the ongoing bad news of continued cost growth. (When cost growth turns up
flat or even negative, that's when your jaw will drop, right?)
The research report dissects costs based on its finding that a typical American family of four racked up $16,771 in medical
bills from 2008 to 2009, paid both out-of-pocket and by a benefit plan.
• Outpatient spending accounted for 17% of total costs with a 10.2% increase, the highest trend among the segments.
• Pharmacy spending accounted for 15% of total costs with a 7.9% increase. Milliman says about 40% of the pharmacy increase
can be attributed to increased utilization.
• Inpatient spending accounted for 30% of total costs with a 7.7% increase. The trend hit a low point with a 7.1% increase
from 2007 to 2008.
• Physician-services spending accounted for 34% of total costs with a 6.0% increase. Although it is the largest slice
of the healthcare pie, this spending component had the lowest trend.
• Approximately 4% of spending can be attributed to miscellaneous services.
• Looking at the longer-term, over the past five years, outpatient and pharmacy spending have increased at larger-than-average
annual rates, while physician services have shown the lowest trend comparatively.
But growth is still growth, and all segments have it in spades.
It's also worth noting who actually pays these bills. According to the report, employees paid 17% of medical costs out-of-pocket
and 24% through payroll deductions (premiums), while the employers paid the other 59%. Annual increases here had employers
paying 5.4% more from 2008 to 2009. Also, employees paid 5.4% more out-of-pocket and a hefty 14.7% more in payroll deductions.
The big deduction increase probably hit a lot of employees particularly hard in this economy, but maybe there is some necessary—if
unpleasant—wisdom there.
Healthcare experts believe consumers need more skin in the game and are still too insulated from actual costs, according to
recent polls from the Kaiser Family Foundation. (President and CEO Drew Altman laid it out nicely in his May 18 blog.)
Consumers, on the other hand, believe quite firmly that they pay too much already and that they should receive healthcare
benefits for whatever their doctors recommend, regardless of cost. Only 22% of consumers even ask about the cost of care,
and less than half would choose a doctor based on any type of expert rating system.
Consumers simply don't see the tradeoffs.
YOUR OPPORTUNITY
It's clear that your opportunity here is to educate your members about costs, choices and tradeoffs. You've probably gotten
through to them about choosing generic drugs; now take it a step further.
Comparative effectiveness research is on deck, and soon this country will have more—and hopefully better—guidance on practical
treatment value. When members begin to see more of the concrete value of treatments, perhaps their cost sensitivity will match
yours.
Julie Miller is editor-in-chief of MANAGED HEALTHCARE EXECUTIVE. She can be reached at julie.miller@advanstar.com
