$16,771 is roughly the cost of health care for an American family of four in 2009, according to the Milliman Medical Index. If the median family income in 2008 was about $67,000, then health care costs represent about 25% of the annual household paycheck (remember, that’s gross, not net, income).

As the chart illustrates, 1 in 3 health care dollars goes to physicians, with another third paid to inpatient services. Outpatient services and prescription drugs consume 15-17 cents on the health dollar in 2009.

The greatest increase in cost trends in 2008-9 is with hospital outpatient services, which grew more than 10% in the year. That outpatient services now exceed prescription drug spending as a percentage of all health costs is a new milestone in the Index.

The increasing costs of physician payments slowed by 0.2% to 6% in 2008-9.
The MMI revealed that unit cost, and not utilization, drove cost increases in the past year. That is, it’s not use, but increase in prices, that increased overall health costs. There’s more managing care in the inpatient setting through risk-sharing arrangements between providers and plans, as well as quality and efficiency initiatives rationalizing inpatient utilization.

Milliman, who as a firm consults with plan sponsors and payers, notes that employers have been allocating more health costs to employees. The portion of health that employers cover is known as the employer subsidy; that subsidy is 59% in 2009 (equal to $9,947), with the employee covering 41% in the form of employee contribution of $4,004 and out-of-pocket expenses of $2,820.

The MMI is the projected total cost of medical care for a hypothetical American family of four (two parents, two children) covered by a PPO.

Health Populi’s Hot Points: In a client discussion I had earlier this week, we talked about the fact that COBRA benefits will be ending by the fourth quarter of 2009 for those Americans who lost jobs in late 2008 and chose to buy into COBRA’s health benefits. With that in mind, we forecasted that in the fourth quarter of 2009 and well into 2010, we can expect to see the number of uninsured American families dramatically increase.

The figure of nearly $17K is a frightening number for Americans in the fragile economy. What to do to get necessary health care?

I’m talking about DIY health care in these times. One aspect of people doin’ health for themselves is shopping around for health services, and Americans are considering shopping overseas. According to a Gallup poll conducted in mid-April 2009, 29% would consider traveling out-of-country for alternative treatments for a major medical problem. 24% would travel for cancer.

The downturn in the economy exerts a double-whammy on American families in 2009: employers who sponsor health insurance will lay more health cost burden onto insured employees as their subsidy declines and the worker’s subsidy increases; and, at the same time, uninsured people face higher costs as unit costs for health services are increased by hospitals and other fiscal touchpoints in the health ecosystem.