It’s Not Just You: Medical Costs Are Out of Control

There isn’t any single reason that medical costs have gone up, but that just means there aren’t any easy solutions either.

How often do you worry about your health? Do you have a plan for what would happen if you or a loved one ended up in the hospital? Because even if you have health insurance, the cost of your stay is likely to put you in a financial hole, one that it will be hard to climb out of.

In a country where the medical debt is the leading cause of bankruptcy, it can feel like medical costs are getting totally out of control. And you know what? There’s a reason for that: It’s because medical costs are getting totally of control.

While there isn’t any single primary factor—some of the reasons actually have less to do with medical costs than they do with the rest of the economy—it’s clear that the current status quo is unsustainable. Here are some of the reasons why medical costs are leading to crippling debt loads.

Costs steadily rise while incomes remain stagnant.

One way to capture rising health care costs is to look at total healthcare spending, specifically as it relates to spending overall. And wow, do people spend a lot more on healthcare than they used to.

Between 1970 and 2016, total national health expenditures rose from just over $370 billion to over $3.33 trillion. Those numbers, by the way, are in adjusted 2016 dollars via the Kaiser Family Foundation. That means that none of that growth is due to inflation.

But what about the growing U.S. population? Well, that same Kaiser study found that per capita health spending has risen at a similar rate, from $1,762 per year in 1970 to $10,348 in 2016. During that same period, health spending grew from 6.9 percent of the U.S. economy to 17.9 percent.

American incomes, meanwhile, have not grown at nearly the same rate. According to this data from the St. Louis Fed, the median American family income in 1970 was $55,743 in adjusted 2017 dollars. In 2017, that same income had only risen to $75,938.

The data says it all: people are spending more money on healthcare than ever before, and that money is taking up a larger percentage of each paycheck.

Why are costs so much higher?

The U.S. healthcare system is a weird beast. While there are public programs like Medicare and Medicaid, the rest of the system primarily relies on employers providing private health insurance to their employees—usually covering some of the cost. Why is our system like this? We won’t get into that here, but, basically, it’s an accident of history.

With a healthcare system that’s so complex, there isn’t one answer as to why healthcare costs have risen so dramatically. The Affordable Care Act (better known as “Obamacare”) made some changes to this system, introducing (amongst numerous other changes) marketplaces for private plans, tax penalties for people who went uninsured, and protections for people with pre-existing conditions. While the passage of the ACA didn’t stop healthcare spending from growing, it slowed its rate of growth to a number more in line with the general economy.

Still, the fundamental (and complex) structure of the U.S. healthcare system remains in place. (Plus, that growth rate for healthcare spending has picked up in recent years.) The issue of U.S. healthcare is a many-headed hydra of different factors.

Here are some of the main ones:

An aging population: As the baby boomers are entering their golden years, their medical care needs are increasing, which taxes the system. Granted, this is something that’s contributing to healthcare spending, but principally the part that’s covered by federal programs. Still, more patients who are expensive to care for are helping to drive costs up.

Rising prescription drug prices: According to 2017 report from the AARP, the average price for 528 different medications tripled on average between 2005 and 2015. One contributing factor here is the billions of dollars that the pharmaceutical industry spends on advertising (particularly on tv advertising) every year. While the math can be complicated, more money spent on advertising generally translates to higher prices.

Insurance can’t make up for rising prices: With health insurance, you only pay a fraction of the full bill for a service (or at least for a service that’s covered by your insurance plan). So if the total price tag is higher, you’ll end up paying more. 10 percent of a $1,000 bill is very different from 10 percent of a $10,000 bill. And the U.S. has higher prices for medical services than pretty much any other country on earth. To get into those specifics would require not just an entire blog post; it would take an entire blog series. Nevertheless, these sky-high prices mean larger medical bills for consumers. They can even impact insurance coverage, as insurers are charging more and more (through higher premiums) even while their plans are covering less and less (through narrower coverage and higher deductibles).

Fear, itself: There’s a vicious cycle that’s taken hold between rising medical costs and healthcare in general. Fear of a massive medical bill leads people to avoid going to the doctor or the hospital as much as possible. This means that when they do end up going to the doctor, it’s usually for a much more serious—and expensive—condition, the kind that probably could have been avoided or treated more affordably through regular visits and preventative care.

Don’t skip out on your doctor’s visit.

There are a lot of factors with higher medical costs that are out of your hands. But that doesn’t mean that all of them are beyond your control.

For starters, don’t let the fear of a high medical bill stop you from going to the doctor. Regular doctor’s visits are much less expensive than lengthy hospital stays, and the expenses are spread out over time. Preventative care will almost certainly save you thousands of dollars in medical costs. Even if the doctor does find something that costs a bit more to treat, catching it earlier will mean a lower price tag overall.

Also, do your absolute best to build up your savings—and especially your emergency fund. $1,000 is a great start, but it is by no means a stopping point. Save as much money as you can, and maybe pick up a handy side gig to help build those savings even faster! The more that you can pay up front, the lower the chances that medical debt will hound you into bankruptcy.

Another upside of a sizeable emergency fund is that you won’t end up needing outside financing to pay your bills. Zero savings and bad credit is pretty much a one-way ticket to a predatory debt cycle, courtesy of dangerous no credit check loans and/or short-term bad credit loans like payday loans, title loans, and cash advances.

If you do end up with a big medical bill, talk to your creditor about financing options. And if you have a lousy credit score, maybe a bad credit installment loan is the best option for you—so long as you do your research and find one that’s both safe and affordable.

When it comes to out-of-control medical costs, there isn’t a ton of advice we can offer. As we laid out in this piece, our country has found itself in this situation due to weird historical accidents and dozens of competing factors. It’s a lot, and it might not be getting much better any time soon. All you can do is take care of yourself the best you can, save money for a rainy day, and keep a clear head once issues arise.

If you want to learn more about saving money and dealing with debt, check out these related posts from OppLoans:

What other questions do you have about rising medical costs? We want to hear from you! You can find us on Facebook and Twitter.

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