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By Javier Sanabria
The price of medical care boosts Consumer Price Index June 2015
A sharp rise in medical care prices contributed to a recent increase in the Consumer Price Index (CPI).
Although economists and healthcare experts have not clearly identified the reasons for the spike, the 2015 Milliman Medical Index (MMI) indicates that prescription drugs are driving medical costs upward.
MMI co-author Chris Girod offers some perspective in this CNBC article.
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The so-called medical care index, maintained by the Bureau of Labor Statistics, rose 0.7 percent in April, “its largest increase since January 2007,” the BLS wrote in a report issued Friday. The BLS report comes three days after the large actuarial and consulting firm Milliman projected 6.3 percent growth in the costs of health care for a typical family of four on an employer-based plan in 2015. That compares to a low-water mark growth rate of 5.4 percent last year. Milliman’s report is the latest indication that health-care costs, which saw a historic slowdown in their rate of inflation in the years after the Great Recession of 2008, are headed back up toward the trends seen before the financial meltdown. Before the recession, double-digit inflation in health-care costs was common. “There’s a correlation between the CPI medical index and the MMI, but they’re very different measures,” said Chris Girod, a principal and consulting actuary at Milliman, who added that the MMI looks at a broader range of prices. “The annual increases [in the MMI] tend to be a lot higher than CPI.” Milliman’s report blamed resurgent inflation on price increases for prescription drugs, particularly specialty drugs. “The rest of the category, the increases were pretty ho-hum this year,” he said. Prescription drug prices overall are expected to increase by 13.6 percent in 2015, according to Milliman’s index. In the category of specialty drug prices alone, “the annual increases are around 20 percent right now,” Girod said. Those specialty drugs include Sovaldi, made by Gilead, which in a 12-week course of treatment can cost $84,000. “The drug trends have actually been coming down in the last four or five years until now,” Girod said.
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See more at:
http://www.healthcaretownhall.com/#sthash.xgDF7hpd.dpuf
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Conclusion
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- Dictionary of Health Economics and Finance
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Filed under: Health Economics, Healthcare Finance | Tagged: Chris Girod, Consumer Price Index, Javier Sanabria, Milliman Medical Index |
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PwC’s Health Research Institute (HRI)
PwC’s Health Research Institute (HRI) projects U.S. medical inflation will dip to 6.5 percent in 2016, capping a ten-year trend of slowing employer medical cost-trend growth in the employer-sponsored market. It is critical for stakeholders positioning themselves for 2016 and beyond to consider and address the associated trends and implications are shaping the New Health Economy.
Despite the year-over-year slowdown, HRI also reported that medical inflation still outpaces general inflation, underscoring the challenges ahead for the health industry. After accounting for likely changes in benefit design, such as higher deductibles and narrow networks, HRI projects a net growth rate of 4.5 percent in 2016.
Each year, PwC’s HRI provides estimates on the growth of private medical costs over the next year and what the leading drivers of that shift are expected to be. Insurance companies use medical cost trend to help set premiums by estimating what the same health plan this year would cost the following year. In turn, employers use the information to make adjustments in benefit design to help offset cost increases.
In compiling data for 2016, HRI interviewed industry executives, health policy experts, and health plan actuaries whose companies cover a combined 100 million members. HRI also analyzed results from PwC’s 2016 Touchstone Survey of more than 1,000 employers from 35 industries.
Ben Isgur
[Director]
PwC’s Health Research Institute
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