Study: Typical American Family Spends $12K on Medical Annually

May 26, 2005

Average medical spending for the “typical American family of four” reached $12,214 in 2005, according to a new study by benefits consulants and actuaries at Milliman, Inc.

The Milliman study determined that the average annual medical cost for a family of four increased by 9.1 percent from 2004 to 2005. The average annual rate of increase for the four year period 2001-2005 was 9.8 percent.

The finding is contained in the first annual Milliman Medical Index (MMI). The MMI measures average yearly healthcare costs when the family of four is covered by an employer-sponsored Preferred Provider Organization (PPO). The MMI is designed to provide a benchmark by annually assessing the changes in a family’s medical costs over the past 5 years.

“Unlike most surveys that focus exclusively on ‘employer’ cost increases, the MMI analyzes what it really costs the U.S. economy to deliver health care, and how this burden is allocated between employers and employees,” according to study co-author William
Thompson, a Milliman consulting actuary.

Robert Cosway, Milliman actuary, said the MMI examines the key drivers and the components of actual medical spending, including physician charges, prescription drugs and hospital charges.

Milliman breaks out and measures the rate of consumer spending versus the rate of total spending for health care in a given year. Based on a typical PPO plan design, Milliman estimates that the typical American family of four would pay $2,035 out of their own pocket through member cost sharing in 2005.

The complete Milliman Medical Index is available at

http://www.milliman.com.