Annual health spending for an insured family to top $20,000

The cost of health care for a typical family of four with insurance will exceed $20,000 for the first time in 2012. One reason that barrier was broken is that patients are showing up sicker at the doctor’s office.

The annual Milliman Medical Index, put out by the Seattle-based actuarial and consulting firm, found overall spending going up 6.9% from 2011. Spending on physicians was up 5%, according to the report, released May 15. While the report did not detail why costs went up, report co-author Lorraine Mayne said her analysis of the data found that acuity of care, not utilization or price increases, was the primary driver.

In that conclusion, Mayne is consistent with other studies released over the previous year finding low physician services inflation, declining visits and insured patients putting off care because of cost, resulting in their being worse by the time they visit their physicians’ offices.

“People are more cautious when spending their own dollars rather than only a portion of the cost,” said Gerald Kominski, PhD, director of the Center for Health Policy Research at the University of California, Los Angeles.

The Milliman Medical Index, a figure the firm has released annually since 2005, estimates the total cost of care for a family of four enrolled in an employer-sponsored PPO plan. For 2012, that figure hit $20,728. The total includes $12,144 in employer-covered insurance costs and $8,584 paid by the family itself: $5,114 in insurance premiums paid by the employee whose family is under the plan, and $3,470 in out-of-pocket expenses.

Although the dollar figure for the index was higher than ever, the 6.9% increase from the prior year was slower than it has been in at least 12 years, according to Milliman.

Milliman breaks down the model family’s health care spending by category: physician services, inpatient stays, outpatient care and pharmacy costs. Spending on physician services grew at the lowest rate of any of the care components in the Milliman index, Mayne said, and that’s been true for several years.

“Some of the other categories are catching up,” she said. As a result, physician services now account for 32% of the medical index, at $6,647 — but inpatient hospital expenses were nearly as high a share, at $6,531.

The problem remains that health care spending has outpaced general inflation, which has been essentially flat, Kominski said.

“The [Patient Protection and] Affordable Care Act was enacted largely to address the inequities and affordability of health care, but at a more fundamental level, we still have not come to terms with finding a way to slow the growth in health spending,” he said.

The 2007-09 recession and its aftermath have decelerated the rate at which health care takes up an increasing portion of our economy, but Kominski believes that’s temporary.

“I think it’s sort of the quiet before the storm, and when the economy begins to fully recover and grow at a robust rate again, I fully expect health care spending to take off and grow even more rapidly than the economy as a whole,” he said. “That has short- and long-term consequences for the nation as a whole.”As part of its report, Milliman examined what it believed would happen after the U.S. Supreme Court rules, as it’s expected to in June, on the constitutionality of the health reform law. If the court strips away the individual mandate — the requirement that people buy insurance or pay a penalty for not doing so — physicians are likely to see more uninsured coming to their practice, Milliman reported.

However, even if the full act is struck down, the pressure to find creative ways to bring down health costs “including a focus on provider reimbursement, coordination of care and narrow networks, will not go away.”