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Milliman Health Cost Study: Facilities Outmuscle Physicians

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Hospitals and outpatient facilities seem to be doing a significantly better job at bargaining for higher rates from employer-sponsored health plans than physicians are this year.

Analysts at Milliman Inc., Seattle, have published data supporting that conclusion in their 2012 Milliman Medical Index report. 

The analysts uses Milliman care cost guidelines data to estimate the average health care costs for a typical U.S. family of four receiving health care through an employer-sponsored preferred provider organization (PPO) plan.

Milliman looks at factors such as the cost of inpatient hospitalization, outpatient care, professional services and pharmacy services. The analysis does not include the cost of long term care, and it does not include insurance plan administration costs.

The average cost has increased 6.9% since 2011, to $20,728.

Milliman Medical Cost Study
Increases in the cost of care components between 2011 and 2012
Inpatient 7.6%
Outpatient 8.6%
Physician 5.0%
Pharmacy 7.3%
TOTAL 6.9%
Source: Milliman Inc., Seattle

The average rate of increase is down from the 7.3% 2010-2011 increase Milliman reported a year ago. The average rate of increase is the lowest the Milliman analysts have recorded since they started doing the study 10 years ago.

The analysts found that costs continue to rise more rapidly for some types of care than for others.

Hospital costs are up 7.6%, and outpatient care costs are up 8.6%.

Physician costs are up just 5%.

Although physician costs increased more slowly than facility costs, physician costs have been increasing a little more rapidly this year than in 2011, and facility costs have been rising a little more slowly this year than last year, the analysts say.

The analysts note that the Patient Protection and Affordable Care Act of 2010 (PPACA) establishes 4 plan categories — platinum, gold, silver and bronze — and that the Milliman benchmark plan seems to be comparable in actuarial value to a PPACA gold plan.

“To date, PPACA has had only a limited effect on total health care costs for the  [Milliman Medical Index] family of four,” the analysts says.

The fact that the U.S. Supreme Court is debating the future of PPACA leaves Milliman with more uncertainty about the future of health care costs than usual, the analysts observe.

If PPACA takes effect as written, some provisions could increase employer plan costs but others could decrease employer plan costs, the analysts say.


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