Taming the rise in health spending…

No surprise to anyone who reads this blog, I’m sure, but health care costs continue to rise at rates eclipsing the rise in overall spending in the U.S.  What may be news to some, though, is that the average annual cost of providing health care to a family of four surpassed $25,000 this year, a milestone to be sure.  At 4.7 percent, this year’s increase elevated this cost to $25, 826, as calculated and reported by Milliman, whose Milliman Medical Index (MMI) analysis has become the go-to source on this since its inception 15 years ago.

While many variables contribute to the rise in costs, MMI analysts highlight a disproportionate increase in spending on prescription drugs as a variable of interest/perpetrator in this crime.  Spending on medications has quadrupled over the 15-year history of the MMI, and at an average increase of $4,270 per family of four annually, it now represents 17 percent of all health care spending.

While this may set off alarms for most stakeholders involved in the delivery and financing of health care, it resonates weakly to the average consumer, though it shouldn’t.  I actually am part of a family of four, and we did not spend anywhere near $25,000 on our health care needs last year or the year before that.  The MMI analysts say that’s typical, as a paltry 20 percent of all health care consumers account for 80 percent of all spending.   Classic example of the Pareto principle if ever there was one.

As such, this is like driving by one of those big screen, high definition, neon-lighted motion picture billboards dotting the streets in Hollywood.  You can’t escape the message even if you want to.  In this case, the message staring us in the face is that the most effective strategies for constraining the rise in health care spending will target the 20 percent of health care super-users with high doses of care management.

What about the rise in spending on prescription drugs?  I say let’s not get overly excited about that, as  this rise is justified by (a) the introduction of new drugs to more cheaply manage costly medical maladies and (b) the greying of America over the 15-year reporting period.  And age is a proxy for the incidence of chronic disease in our population, and that correlates well to the rise in prescription drug usage.

So, let’s do a lot more care management, why don’t we?

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