Believe it or not, the average cost of health care for a family of four in America in 2023, according to the Milliman Medical Index, was $31,065 in an employer plan.
Yes, you read that right. The employer typically picks up 70%-75% of the total, and the employee pays the rest at about $8,000 per year for premiums, co-pays and co-insurance.
Obviously, the hyperinflation in health care is a big contributor to the overall inflation rate of the country – arguably the biggest political issue in the current presidential campaign. Health cost inflation has consistently run hotter than the general inflation rate.
Other bean-counters have somewhat lower numbers for a family of four, but no one argues with the reality that out-of-control health costs are the leading cause of personal bankruptcy in the United States.
The runaway health costs in Wisconsin are hurting companies and the state’s economy as well.
Based on an employer survey of business leaders, Wisconsin Manufacturers and Commerce said recently that businesses here are “at an extreme disadvantage” when it comes to health care costs.
Among the drivers of soaring costs of care are higher wages for scarce workers, mergers of providers to gain market leverage for higher prices, price sharing by providers through health plans they own together and escalating drug prices.
WMC stopped short of calling for trust-busting in the Medical Industrial Complex or for more price regulation through a Public Service Commission.
John Torinus
Here’s one more factoid to make the case that soaring health costs are the number one economic issue facing citizens in the country and should be front and center for former President Donald Trump and current Vice President Kamala Harris: Milliman puts the average sticker price of a joint replacement at $68,616.
That is an absurd price. Cost accounting puts the total costs for the prosthetics, hospital and surgical at less than $10,000. My company, Serigraph Inc., pays $28,600 through a direct contract at one of the best bone shops in the country. In short, the pricing array for procedures in America is one of chaos. The famous Omaha Surgical Center charges about $15,000 all in.
Perhaps because of the out-of-control nature of health cost inflation, Trump and Harris have ducked largescale solutions. Consultants project a 6% to 8.5% increase across the board for 2025.
Harris retreated from the sweeping “Medicare for all” that she once espoused. She now proposes smallball measures. She will expand Obamacare.
Trump has backed off his earlier attacks on Obamacare, but has offered no alternatives. He said in their debate that he has some “concepts of a plan” in the works, but has never fleshed out his “concepts.” He has had eight years in office or running for president to come up with something, so it’s fair to assess he has no plan.
Harris’s more timid approach to the issue in her campaign includes a $2,000 cap on individual drug costs.
Meanwhile, more and more self-insured employers are working to change the game at the ground level. They have installed on-site care clinics that work proactively to keep people healthy and out of hospitals, and with increasing numbers of “direct primary care centers” that compete with the big systems They are putting together a network of direct contracts for expensive procedures at far lower prices.
They are incentivizing family wellness.
They are finding pharmacy benefits managers that pass along all drug companies’ rebates (aka kickbacks) for specialty drugs.
The cumulative results for companies that apply management rigor and smarts to health costs is that they operate at about half of the Milliman total.
Why the two presidential candidates don’t listen to self-insured managers of health care is a mystery. The reality, though, is that politicians listen to consultants and wonks who have never paid a health care bill for a group of workers.
When a self-insured business pays the bills, often one of the top three costs in the company, they get smart fast on where they are being gouged. They pay close attention.
For politicians, those soaring costs are an abstraction.
John Torinus is retired CEO of Serigraph Inc. in West Bend and blogs regularly at www.johntorinus.com.
