In 2005, a hypothetical American family of four spent about $12,000 per year on healthcare. Today, that same family is spending nearly $35,119, according to the 2025 Milliman Medical Index. That’s a 188% increase — far outpacing inflation, wages, or the cost of gas, milk, or electricity.
So where is that money going? And more importantly: what can employers and health plans do about it?
Pharmacy and Outpatient Costs Are Driving the Surge
For the average person, healthcare costs jumped 6.7% this year alone. Two culprits accounted for 69% of that increase: pharmacy and outpatient facility care. Pharmacy costs rose nearly 10%, largely due to high-cost specialty drugs, including GLP-1 medications like Ozempic and Wegovy. Outpatient costs increased 8.5%, driven by high-priced, hospital-administered drugs and advanced surgical technologies.
These aren’t fringe services, they’re central to modern care. But the way they’re priced and paid for, especially in hospital settings, leaves plan sponsors and members picking up the tab.
Rebates Help If You Can Get Them
The MMI estimates pharmacy rebates reduce gross costs by about 31%–33% in the large employer market. That’s substantial. Yet many self-insured employers don’t see those savings directly, and rebate practices remain opaque.
Without rebates, the average person’s healthcare cost in the MMI would have been nearly 10% higher. But rebates don’t reduce out-of-pocket costs at the pharmacy counter, which is what members notice most.
Plan Design Shift: Higher Premiums, Lower Point-of-Care Costs
Compared to 2005, employees are paying more in payroll contributions (up from 21% to 27%) and slightly less out of pocket (down from 18% to 15%). That shift reflects modern plan design: pay more up front, less at the doctor’s office. But it still means employees now bear 42% of the total cost of care — nearly $3,300 a year per person — through premiums and copays.
What Can Be Done?
Employers and Medicaid programs alike are looking for solutions that actually bend the cost curve, not just shift it. That means:
- Managing polypharmacy and deprescribing for high-risk patients
- Switching to biosimilars and therapeutically equivalent generics where appropriate
- Avoiding hospital markups on outpatient-administered drugs
- Improving transparency around rebate contracts and formulary choices
The MMI makes clear that cost growth isn’t slowing. But smart interventions, especially those that work within existing provider workflows can help bring costs down without compromising care.
At RazorMetrics, we’ve spent years obsessing over this exact problem: how to reduce pharmacy and outpatient costs without adding burden to prescribers or disrupting care.
Our solution targets the biggest cost drivers Milliman identifies polypharmacy, high-cost outpatient drugs, and branded medications where lower-cost therapeutic alternatives exist, but we accomplish this within the normal clinical workflow. No pop-ups. No extra clicks. No external apps.
It’s a physician-directed approach that makes savings actionable without complicating the work of care delivery. Because while $35,000 a year may be the norm, it doesn’t have to be the future.
