SEATTLE - According to Milliman, Inc, a global consulting and actuarial firm, the average total medical spending for its "typical American family of four" reached $14,500 in 2007, an increase of $1,118 over the preceding year. 

The finding is contained in the third annual Milliman Medical Index (MMI). The MMI tracks the changes in average yearly healthcare costs when the family of four is covered by an employer-sponsored Preferred Provider Organization (PPO).

According to Milliman, the average annual medical cost for a family of four increased by 8.4% from 2006 to 2007. This was lower than the 9.3% average annual rate of increase for the period 2003-2007.

"The cost of healthcare varies significantly by metropolitan area," said study co-author Lorraine Mayne, a Milliman principal and consulting actuary. "This could have implications for any national healthcare reform proposals that utilize a standard nationwide tax deduction," Mayne added.

The MMI examines the key drivers and the components of actual medical spending, including physician charges, prescription drugs and hospital charges," said Gary Brace, Milliman principal and study co-author. "We break out and measure 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 $2,420 out of their own pocket through member cost sharing at time of service in 2007, an increase of $210 over last year," Brace added.

Medical costs for a family are determined by the number, type and cost of healthcare services that they utilize and the amounts that the employee's health plan pays medical providers for these services.

Based on the family's ages, geographic area, health status and other factors, the utilization of medical services for a particular family varies significantly. The MMI is based on Milliman's analysis of historical claim data and understanding of trends in provider contracting