If you feel like health insurance premiums, copays and coinsurance are becoming a bigger part of your budget every year, it’s probably not your imagination. Healthcare costs in the United States have been rising for decades, and unfortunately, they will probably keep rising. The American Medical Association’s (AMA) own research shows that healthcare costs are rising by about 4.5% a year.
Rising Costs Are A Multi-headed Beast
It would be great if there was only one reason for the rising cost of health care so we could easily tackle it, but a recent Journal of the American Medical Association (JAMA) study identified at least five factors that affect the cost of healthcare:
- Population growth - more people is more usage and more strain on the system
- Aging seniors - the longer we live the more illnesses we treat and longer we treat them
- Disease prevalence or incidence - think of just the cost of a pandemic like COVID-19
- Medical service utilization - whether and when we seek treatment affects costs
- Service price and intensity - the market rate of services at different levels
Insurance Protects Your Wallet But Comes With a Price
According to a RAND Corporation study, payments to finance health care were $9,393 per person in 2020, or 18.7% of average household income. While you may only be thinking of out-of-pocket expenses, more than 90% of costs came from health insurance premiums and taxes.
This study also found that households earning more than $250,000 pay the most to finance the nation's health care system, due to the 3.5% Medicare tax surcharge on high earners. However, households with lower incomes pay a much higher percentage of their earned income on health care costs.
The Effect of High HealthCare Costs May be More Serious Than you Think
Research by KFF (Kaiser Family Foundation) has found that half of U.S. adults say they put off or skipped some sort of health care or dental care and 29% report not taking their medicines as prescribed at some point in the past year because of the cost...
This was not surprising after research revealed that nearly half (46%) of insured adults report difficulty affording their out-of-pocket costs, and 27% report difficulty affording their deductible.
Only Part of The Solution Will Come From the Government
The No Surprises Act went into effect the first day of 2022 and guards against one of the leading causes of health care cost distress - surprise billing. It outlaws surprise medical and hospital bills, air ambulance bills and requires transparency about in-network and out-of-network deductibles and out-of-pocket limitations. But, there is much more that we can do ourselves to be better prepared for our health care costs:
Get Educated About Health Care Costs at FAIRHealthconsumer.org FAIRHealthconsumer.org - Their mission is to help you understand your healthcare costs and coverage so you can make the best decisions.
Get Help With Budgeting and Paying for Healthcare from Lifespan - They offer in-home financial management for seniors where trained volunteers provide monthly assistance with bill paying, budgeting, checkbook balancing and benefits.
Make Sure Healthcare is Part of Your Financial Planning with Iryss - We can help you explore your options for planning, budgeting and saving for the rising costs of healthcare.
Join Iryss to receive a check up on your investments, improve your financial literacy, and get your financial plan on the right track