May 31st, 2023 7:00am PDT
(PenniesToSave.com) – The 2023 Milliman Medical Index reveals that the average American family of four is facing healthcare costs of $31,065 this year. This index calculates the expenses associated with healthcare for individuals and families who are covered under an employer-sponsored preferred provider plan.
For the average person, the costs have reached $7,221.
In the current year, healthcare expenses have risen by 5.6%, with an average yearly increase of approximately 4.8% since 2021. These numbers align with the pre-COVID-19 trend of annual increases in healthcare costs. Whether this indicates a return to the previous normal or a recovery from the pandemic, it is evident that family healthcare expenses are steadily climbing once more.
According to Doug Norris, co-author of the Milliman Medical Index, healthcare cost inflation typically lags behind general inflation by six to twelve months. Even though general inflation has seen recent improvement, healthcare costs will take some time to catch up.
Alongside inflation, healthcare costs are also being driven upward by other macroeconomic factors such as supply chain problems, labor shortages, and a strong job market. This insight comes from the authors.
What are the repercussions?
The data shows that almost 60% of the cost increase this year can be attributed to employees. This suggests that increased job mobility and the challenges of remote work are motivating employers to prioritize investments in benefits.
Although pharmaceutical rebates don’t have a direct impact on employee out-of-pocket costs, they are a major concern for employers and the healthcare industry when it comes to pharmacy benefit management. According to the report’s authors, rebates could make up around 25% to 31% of drug costs. If these rebates were distributed among employees, as some propose, average prescription drug costs for employees could potentially be reduced by approximately 6%.
In the future, the authors predict that healthcare price transparency might help decrease costs for individuals and families. By mandating hospitals and payers to disclose their negotiated reimbursement rates, this shift in market dynamics could potentially benefit employers who can leverage the data to lower expenses.
The prevailing pattern
The 2021 MMI reported that healthcare costs for a family of four experienced a rare decrease, marking the only recorded year with such a decline.
Amid the public health emergency, healthcare costs saw a visible decline of 4.2%. By analyzing revised claims data, it was found that in 2020, the healthcare expenses for a hypothetical family of four totaled $26,078, compared to $27,233 in 2019.