Healthcare Costs for Average Family Exceed $31K

Healthcare costs for Americans are climbing higher once again following slower growth and even a rare decrease during the COVID-19 pandemic, according to the latest Milliman Medical Index (MMI) report.

The cost for a hypothetical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is now $31,065. And cost for the average person reached $7,221, shows the report using 2021 healthcare claims data projected forward to 2023.

Since 2005, the Milliman Medical Index has estimated annual healthcare costs for a hypothetical American family consisting of a 47-year-old male, a 37-year-old female, a 4-year-old child, and a child under age 1. Families may differ, but the MMI has shown a relentless hike in healthcare costs for this family and others like it.

“Healthcare costs increased 5.6% this year and have increased by 4.8% annually since 2021, which is the sort of year-to-year increase we were seeing before the pandemic,” Dave Liner, co-author of the 2023 MMI report, said in a statement. “Call it a return to the status quo or a rebound from the pandemic—either way, family healthcare costs have resumed their persistent climb.”

Inflation has a major impact on this year’s MMI report as general inflation in the US reaches its highest levels in about four decades. The report says that high inflation levels are likely to boost healthcare costs even more since medical inflation typically responds to general inflation but with a six- to 12-month lag.

Other macroeconomic factors impacting current healthcare costs include the strong labor market, which has led to more churn in the employer-sponsored market, and ongoing healthcare supply chain issues. The report also points to the provider labor shortages, which have driven up expenses for hospitals and practices.

Recent efforts to increase healthcare price transparency, though, may drive down healthcare costs for Americans. The report says organizations armed with provider-specific reimbursement rates and other standard healthcare charges should have enough data to bring down healthcare costs.

Employers could give plan participants actionable price and quality information, empowering them to shop around for the most valuable care — a promise high-deductible health plans came with but could not fulfill, according to the report. The information could also transform how employers design provider networks and plans to produce better outcomes at lower costs.

Achieving lower healthcare costs through price transparency will take some time. The report cautions that the use of standard pricing data is still in its infancy, and it will take time for payers and providers to figure out how to best leverage the data for price negotiations.

Furthermore, the sheer volume of healthcare pricing data, thanks to new federal requirements like the 2019 hospital price transparency rule, is daunting and challenging to interpret appropriately, the report says.

“Looking toward the future, costs for families and individuals may see downward pressure as a result of healthcare price transparency,” said Mike Gaal, co-author of the Milliman Medical Index. “Hospitals and payers are now required to publish their negotiated reimbursement rates, a move that has the potential to create systemic change in the market dynamics—especially for employers that can harness the data to drive down costs.”