Milliman measure finds healthcare cost growth slowing to 5.4%

The annual Milliman Medical Index estimate of the projected total cost of healthcare for a hypothetical family of four is out and the good news is that the amount only increased 5.4 percent this year, the lowest rate of annual increase since Milliman first began tracking this cost in 2002. The bad news is that the cost is now up to $23,215.

Milliman is one of the largest providers of actuarial services and related products, and each year, it measures the total cost of healthcare benefits, not just the employer’s share of the costs or the beneficiary’s premiums, for a family of four covered by an employer-sponsored preferred provider organization (PPO) plan. It notes that over the last 10 years, the 7.6 percent average rate of increase in the cost of healthcare benefits has far outpaced the approximately 2.3 percent annual increase in the consumer price index that measures inflation.

The report notes that while employers still pay the largest portion of healthcare costs, contributing $13,520 per year, or 58 percent of the total, employees now share more of the cost burden than they used to. Since 2007, the cost to employers has increased 52 percent, which is high but nothing like the 73 percent increase that the hypothetical family of four has borne. When counting payroll deductions and out-of-pocket costs, the family’s costs have gone up on average 8 percent each year.

The report also notes that because it tracks a family of four with employer-based insurance, it primarily measures large group health plan costs. Therefore, the emerging reforms required by the Patient Protection and Affordable Care Act (ACA) have had little direct impact on the cost of healthcare as measured by the Milliman Medical Index.

Consumer frustration with the growth of healthcare costs and lack of clear perceived value may be better understood in light of Milliman's finding. The same week as the Milliman Medical Index came out, Morning Consult Health’s first market research poll of 2014 was released. It surveyed more than 3,000 registered voters nationwide about what words they associated with the word "hospitals,"  as well as terms for other entitities involved in the healthcare delivery system like doctors, nurses, pharmaceutical companies, medical device companies and health insurance plans. For hospitals, the most common response was "expensive."