$15,609 could cover a lot of household needs for the average American family in the course of a year: utilities, mortgage, gas tank fills.
 
It’s also the cost of health care to cover a family of four in 2008.
 
Milliman notes that the average annual medical cost for a family of four increased by 7.6% from 2007 to 2008. This rate of increase is lower than the 8.4% average annual increase between 2003-2007; however, the burden of overall expense is “steadily shifting to employees,” Milliman attests.
 
Health spending splits into five components, as the Milliman Medical Index measures it:
  • $5,435 to physicians = 35%
  • $4,724 to inpatient = 30%
  • $2,516 to outpatient = 16%
  • $2,302 to pharmacy = 15%
  • $633 to other health care uses = 4%.

Since 2007, Milliman notes a shift toward pharmacy away from physician costs. The rate of increase in pharmacy costs was 10.6% while physicians’ costs rose ‘only’ 6.2%. The rise in drug costs was the first time pharmacy costs exceeded other categories in three years. Specialty drug trend is especially driving the pharmacy cost up — the increase between 2007-8 was 17.6% (and you thought petrol-inflation was high). 

 Health Populi’s Hot Points: In the Milliman data, the total $15,609 health cost is shared between the employer, who covers $9,442 and the employee, who pays $6,167, or 40%, of the total. This is paid through payroll deductions ($3,492 annually) and out-of-pocket cost-sharing at the point of service of $2,675.

Milliman raises an important point in its conclusion: “cost trends in employee contributions lag behind the broader medical cost trend by 12 to 18 months.” This means that increases paid-for by covered employees this year are actually costs that increased in late 2006 and 2007. If health care costs increase in 2008 — and there is no reason to expect they won’t — the cost burden shifted to employees will continue to increase beyond the current 40%, or $6,167, borne by those fortunate enough to be covered by their employers.

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