May 24, 2016
Milliman Medical Index: Healthcare costs for a typical American family will exceed $25,000 in 2016 and have tripled since 2001
Healthcare costs reach $25,826 for the typical American family of four, compared to $8,414 in 2001.
Milliman, Inc., a premier global consulting and actuarial firm, today released the 2016 Milliman Medical Index (MMI), which measures the cost of healthcare for a typical American family of four receiving coverage from an employer-sponsored preferred provider plan (PPO). In 2016, costs for this family will increase by 4.7% — the lowest rate of increase in the history of this study — though the total dollar increase of $1,155 marks the 11th consecutive year that the total dollar increase has exceeded $1,100. The employer pays $14,793 of the total healthcare costs and the employee — through payroll deductions and cost sharing at the time of service — pays $11,033.
2016 Milliman Medical Index
In 2016, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $25,826, according to the Milliman Medical Index (MMI).
Milliman Medical Index is an actuarial analysis of the projected total cost of healthcare for a hypothetical family of four covered by an employer-sponsored preferred provider organization (PPO) plan. Unlike many other healthcare cost reports, the MMI measures the total cost of healthcare benefits, not just the employer's share of the costs, and not just premiums. The MMI only includes healthcare costs. It does not include health plan administrative expenses or profit loads.
Key findings of the 2016 MMI include:
1. Our lowest annual increase in 15 years still pushes the MMI over $25,000. The cost of care for the typical American family of four has more than tripled since its value of $8,414 in 2001. And the current level of $25,826 is just an average. Healthcare spending for any given family can range from $0 into the millions of dollars.
2. The percentage increase in the MMI is at its lowest rate ever. However, even at 4.7%, which is the lowest annual increase since we first measured the MMI in 2001, the rate of increase is still well above growth in the consumer price index (CPI) for medical services, and far surpasses the average 2% annual increase in median household income between 2004 and 2014. More than ever before, health insurance is a critical component of a family's financial security, and yet it continues to become less and less affordable.
3. Employee expenses increase at rates higher than total healthcare spending. At $11,033, the employee's total cost increased by 5.3% from 2015, while the employer's cost increased 4.2%. In fact, only once in the past 10 years have employee costs increased at a lower rate than employer costs. Back in 2001, the first year we measured the MMI, employers paid 61% of costs while employees paid 39%. In 2016, the same split is 57% and 43%. Employees are shouldering more of the healthcare cost burden than they were 15 years ago.
4. Prescription drugs, the most rapidly growing MMI component, are nearly 17% of total healthcare spend. In 2016, the MMI family's prescription drug costs will reach $4,270. That's almost four times as much as the $1,111 in prescription drug expenditures the family had in 2001. Prescription drug expenses grew at 9.1% from 2015 to 2016, a lower rate than last year's 13.6% increase.
Comment by Don McCanne
The Milliman Medical Index (MMI) is the cost of health care for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan. It is now over $25,000 ($25,826).
Although the annual percentage increase in the MMI has been declining - this year down to 4.7% - the dollar increase has exceeded $1,100 for each of the last 11 years. Though some of that is paid by forgone wage increases, that is quite a bite to being taking each year out of the wages for a typical worker's family of four.
Nor should the declining rate of increase in the MMI be celebrated as a success of the Affordable Care Act. It is in excess of four times the rate in the increase in the CPI over the last 12 months (1.1%). Families on the average are ending up further and further behind because of the increases in our health care costs.