Medically Approved

2016 healthcare costs triple that of 2001


Optum Perks Author

By Optum Perks Author

Yes, you read that right. Over the course of fifteen years, healthcare costs for the average American family of four has surpassed the $25,000 mark in 2016 - triple that of the cost in 2001. And it gets better. The annual Milliman Medical Index analysis found that it's the eleventh year in a row that the total dollar increase has been above $1,110.

The reason for this? The Index says it's largely due to the brisk increase of what insured people are paying for their prescription drugs. It makes up almost 17 percent of the total amount spent on healthcare in the United States, and that number alone averages out to $4,270 each year. That's four times what average-sized families were shelling out for prescriptions in 2001. Granted, this doesn't take into account any rebates offered by companies, which is becoming common as a way to reduce costs for those who have trouble affording their medications.

Those numbers do, however, include premiums that are being paid by both employer and employee as well as out of pocket expenses. Currently, the Index has found that employers pay an average of 57 percent of the total healthcare cost. That number has dropped from 61 percent in 2001.

At first glance, these numbers might appear rather scary, but it isn't all bad. The Index also found that, despite the increases, 2016's 4.7 percent increase is the lowest since the Index began keeping track of all these stats in 2001. That's not enough for most people, though, to offset the most recent unsettling numbers.

A lot of people can't quite figure out why healthcare costs seem so out of control. If all that's needed for most of the population is preventative care visits and routine check-ups, why are we forced to pay so much? The truth is that about 80 percent of healthcare costs come from the 20 percent of the population who require the more expensive medical services. Consequently, this drives up insurance premium costs for everyone else.

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Some are tempted to hold the Affordable Care Act (a.k.a. ObamaCare) accountable for the constantly increasing costs. While the healthcare law may be a partial cause, it can't take all the blame. Really, there doesn't seem to be too significant an impact in that regard. Likewise, neither is it clear whether the program has slowed the rate of healthcare cost increase.

The type of health insurance tracked by the Milliman Medical Index is that which is offered through a person's employer, and it's definitely the source of the overwhelming majority of insurance coverage in the US. According to CNBC, around 155 million employees and their families rely on this coverage offered through their jobs. By contrast, 77 million people are covered by Medicade. Medicare insures about 57 million individuals. These last two programs are designed mostly for seniors and those living below the poverty line.

In addition, another 12 million Americans insure themselves through private individual plans offered through ObamaCare exchanges. Several million more have chosen plans outside of those exchanges.


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