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Healthcare Costs Up 7.8% for PPO Plans; Miami, New York City Most Expensive

Cheryl Clark, for HealthLeaders Media, May 13, 2010

The cost of providing PPO plan healthcare to a family of four went up 7.8% to $18,704 for 2010, or $1,303 more than in 2009 and "the highest (dollar increase) we have seen in the last 10 years and since the inception of this index," reports the Milliman Medical Index issued yesterday.

Interestingly, the average costs were not attributed to more patients getting care, but on higher costs of certain kinds of care such as outpatient and inpatient services, which represent 17% and 31% of all costs. "The largest dollar increase this year was for inpatient facility care, which increased by $498 annually," the report says.

Although physician costs are the biggest single piece of the cost pie, representing 33%, the rate of increase of their cost of care dropped from 6% to 5.2%.

The report said that hospital services and physician services contributed $820 and $301 to the $1,303 increase, while pharmacy contributed $151.

The report also noted wide disparity in costs by geographic region, with Miami leading the nation at $22,089, followed by New York City, $21,477; Chicago, $20,412; Boston, $19,654; Memphis, $19,146; Philadelphia, 18,933; Minneapolis, $18,666; Washington, D.C., $18,548 and Los Angeles, $18,098.

The lowest cost cities were Dallas at $18,030; Denver, $17,817; Atlanta, $17,122; Seattle $17,007; and Phoenix, $16,071.

Miami, New York City, and Chicago had costs at least 10% higher than the national average.

Prescription drugs were another driver of costs, the report said, although it increased at only 6.1%, lower than the 7.8% overall. But of the 6.1%, 17% was due to increased number of prescriptions while the other 83% was due to unit cost increases.

Other elements of the report include the notation that employers picked up a larger share of the healthcare cost increase, "a reversal from three previous years that saw employees taking on more of the increase. Many employers expected healthcare reform would bring wide-scale changes to the healthcare landscape and preferred a wait-and-see approach before making changes to their programs that might disadvantage them in the new legislative environment," the report said.

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