Five Ways Rising Health Costs are Affecting U.S. Households
One of the biggest expenses for any American household now is health care. Whether this is in the form of health insurance premiums, out-of-pocket fees, or medication copayments, health care expenses are dramatically affecting the bottom lines of most U.S. families. In 2016, the U.S. economy spent almost $3.3 trillion on health care, or almost $10,300 per person. This is a staggering amount that is affecting Americans in ways that are quite obvious as well as more subtly.
Families Have Less Disposable Income
A study by the RAND group found that the amount Americans paid for health care doubled between 1999 and 2009. In terms of flat dollars, the average family saw its income increase by $23,000 annually during this ten-year period, but in reality, the ballooning cost of premiums and bills left the average family with only another $95 per month in 2009. This surge in prices reduced the net amount that families had to spend on other things. If inflation is taken into account, U.S. families should have had a net increase of $450 per month in 2009, or about an additional $5,000 a year.
This is a frightening reality when you consider that the U.S. economy is based on purchasing goods. Without those hundreds of billions of dollars in potential buying power, the American economy is essentially operating at only 80 percent of its full potential. The disposable income that could be spent on other important items like home financing, college tuition or, even basic living items is instead going towards health coverage and that poses a serious threat to the nation.
What many people fail to realize is that much of the cost for health care in the U.S. is paid through taxes instead of premiums or medical bills. In 2009, the cost of Medicare (insurance program for seniors) and Medicaid (insurance program for low-income families) was $676 billion, or more than ten percent of the entire federal budget. Almost the entire federal budget is funded by taxes on American households and companies.
As the cost of these insurance programs has grown, so to has the tax burden. In the RAND study, if you factor in the amount of tax increases should have risen from 1999 through 2009 for funding health care programs, the average family would actually be losing $295 per month. Most families did not experience this, however, because the federal government resorted to additional borrowing rather than increasing taxes.
One of the more hidden costs of rising health care costs is the loss in potential wages. Unlike most other nations, the United States does not have universal health care that would place the financial burden on the government. Instead, the federal government forces private citizens and employers with more than 50 employees to obtain health coverage. For most businesses, the enormous cost of insuring workers forces them to forgo other financial outlays like higher employee wages.
Between 1999 and 2009, the average amount that employers had to contribute per employee each month rose from $240 to $550. Most economists believe that if employers didn’t have to pay these higher premiums on worker health plans, much of that money would have gone into higher salaries for their workers.
Many people think that the introduction of the Affordable Care Act shifted that financial burden of health coverage onto the federal government and, eventually, onto taxpayers. While it is true that the federal government does shoulder much of the burden, Americans do still need to pay modest premiums and out-of-pocket fees for medical services.
These expenses are substantial enough that many who got insured through the Medicaid expansion or the Obamacare insurance exchanges have effectively fallen into poverty. A new study published in the American Journal of Public Health found that of the 7 million newly insured, 4 million were essentially pushed into poverty due to the high cost of medical services.
The surging price of health care in the U.S. has been producing problems for American households for many years, but the real cost may not be apparent until much farther into the future. A study by the Kaiser Family Foundation reveals that 27 percent of Americans have put off seeing a health care professional due to the cost. Another 23 percent have foregone a test or treatment, and 21 percent have not filled a prescription due to the cost.
Although more than 90 percent of the American population is insured, many households are only nominally covered. These underinsured may have some financial protection in the case of a serious medical emergency, but the high annual deductibles and copayments put regular medical care out of financial reach.
Unfortunately, for most of these underinsured, putting off doctor’s visits means risking their health as well as their finances. More Americans are developing chronic health conditions like diabetes or high blood pressure that can be managed if readily detected and treated. Without medical intervention, however, life-threatening conditions like stroke, heart attack or organ failure could occur. If these serious health conditions do arise, then the cost of treatment often rises to unmanageable proportions as well.
The Future is Worrisome
Unfortunately, it is unlikely that health care prices will go down in the near future. In 1960, only 5 percent of the U.S. economy was devoted to health care, compared to 17.9 percent in 2016. Although there have been years when health care inflation slowed, the overall trend lines are clear: health care prices are rising faster than general inflation. Eventually, this expenditure will swamp almost all other spending, making the U.S. economy unsustainable.
There are ways to help protect yourself and your loved ones from health care inflation. You may want to speak with one of the insurance professionals at the highly respected brokerage Boost Health Insurance. They can tell you how to set up a health savings account or the best ways to supplement your current health insurance policy.
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