Healthcare costs have been going up significantly. The Affordable Care Act provided people with insurance who previously couldn’t afford it, but at the same time, premiums have been rising, along with prescription drug costs and other out of pocket expenses. Premiums are expected to go up by an average of 5% this year alone. More than half of U.S. workers have a deductible of at least $1,000. What’s causing this rise in healthcare expenses? And what can we do about it?
Healthcare and Technology
A recent New York Times article proposed that it was improvements in technology that are making healthcare costs go up. The technology we use to treat patients, in hospitals, doctor’s offices, and other medical facilities, is constantly improving. In order to give people the best care, these healthcare providers understandably want to be on the cutting edge of that technology.
But this technology also costs more. So in order to pay for it, your healthcare provider needs to charge you more money. It’s estimated that changes in technology are responsible for anywhere between one third and two thirds of the total healthcare cost increase per person.
Some have proposed that technological improvements also lead to increased healthcare costs in a different way. By improving the average person’s health, they increase their overall lifespan, thus also increasing the amount of healthcare they’ll need as they get older. But the New York Times article points out that this is a case of flawed logic.
A person who lives to, say, 85, will not necessarily need more healthcare than someone who only lives to 65. What they need depends on how healthy they are during that time. An 85 year old who takes good care of themselves and doesn’t have any chronic ailments won’t require that much more healthcare than someone 20 years younger. And since improved technology is not only extending lifespans but also improving general health for people of all ages, living longer isn’t really responsible for the growth in healthcare spending.
Other Reasons for Rising Healthcare Costs
The cost of healthcare is going up not just for you, but for your healthcare provider as well. There have been a number of cases in the news over the last couple of years of pharmaceutical companies charging enormous amounts for their prescription drugs and other treatments. For companies that cover those treatments under their insurance, the options are limited. They can either absorb the cost and pass it on to the rest of their customers in the form of higher premiums, or they can stop covering them and let their patients pay the exorbitant prices themselves.
As a result of this Sophie’s Choice, many healthcare providers are losing money trying to keep their costs competitively low. Therefore, they choose to withdraw from certain marketplaces where they’re suffering losses, leaving fewer options for people looking for insurance in those areas. The remaining options are often far more expensive than they can afford.
What to Do
Some experts recommend that the way to get the most out of your healthcare is to contribute to a Health Saving Account—and then don’t use it. With an HSA, you contribute a portion of your paycheck to it each month, the same way you do with your 401(K). Then when you have medical expenses, they come out of the account. But as long as you’re reasonably healthy, it’s a good idea just to leave the money alone and let it build up over time. Then, when you’re older and need more medical care, you’ll also have the means of paying for it.
The reasons for rising healthcare spending are numerous and complicated. Technology is just one contributing factor. Furthermore, with significant proposed changes to the healthcare system on the horizon, it’s difficult to know what’s in store, or how it will affect us as individuals. We’ll just have to wait and see what happens over the coming months and years.