The cost of coverage and care has been growing rapidly on an annual basis in the health care industry for more than a decade at this point, and there aren't many signs of slowing down. As both keep rising, concerns among the general public are growing, too. That's a trend that is only expected to continue for some time to come, and it's a major issue for care providers, insurers and consumers alike to watch carefully.
Perhaps the biggest problem around health care costs these days is that they are rising far more rapidly than take-home pay, and with millions of people filing for unemployment in recent weeks as the coronavirus spreads, the impact of unaffordability continues to spread. From 2009 to 2019, average earnings have barely outpaced inflation, growing some 26% - only six points ahead of the inflation rate over the same period, according to the Philadelphia Inquirer.
However, industry data shows average health insurance premiums have jumped 54% during that time, and the prevalence of growing deductibles has pushed those out-of-pocket costs up a staggering 162% in a decade.
Moreover, because of those high costs, utilization is not growing at nearly the same rate as spending. For instance, use of outpatient services grew 3.5% from 2014 to 2018, but spending on them jumped more than 21%. Likewise, prescription drug use was up 4.3% while spending increased nearly 26%
The reality on the ground
In fact, a recent Bankrate survey found that almost 1 in 3 Americans say that either they or one of the people in their households have gone without needed medical care because they were concerned about the cost. The people most likely to fall into this category were millennials, of which 40% went without care. That was the largest share for any age group, but Gen Xers weren't far behind at 35% - slightly above the national average. Likewise, 37% of people making less than $40,000 annually forewent care at least once in the previous year.
In addition, though, 44% of families who bought their own health insurance rather than obtaining it through an employer struggled to keep up with treatments due to cost concerns - a number significantly higher than the 33% reported by people who were uninsured, as well as the 34% among those who had insurance through work. Only those on government-funded programs like Medicare or Medicaid were more likely than the average to seek care when needed (26%).
Furthermore, 28% of people sought some sort of financial fix for this issue, taking on debt (9%), borrowing money from loved ones (8%) or dipping into their retirement savings (7%). Another 3% either consolidated their debts or declared bankruptcy.
An ongoing issue
With so many people facing financial hardships, these problems are expected to persist for years to come under the current system. Recent analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services found that from 2019-2028, national average expenditures on health care will likely grow at an average rate of 5.4% per year. At the end of that period, costs are projected to make up 19.7% of the GDP.
A big part of the reason for that growth is the baby boomer generation will continue aging into Medicare eligibility, and will experience the highest degree of growth for any care provider in terms of pure enrollment. Consequently, it's expected that spending for Medicare will rise at an average of 7.6% per year over the decade in question.
In addition, it's projected that there will be a slight decline in the number of people who have health insurance nationwide, from the nearly 91% seen in 2018 to slightly more than 89% by 2028.
What can be done?
As all this is going on, however, one of the biggest and most persistent issues in the health care and insurance industries is related to waste, in large part because of a lack of standardization of processes among care providers, according to new analysis from Michigan State University. Altogether, roughly 30 cents of every dollar of the total $3.6 trillion spent on health care costs nationwide falls into this category.
For instance, by standardizing the kinds of resources needed for a given surgery type, hospitals may reduce waste significantly, in terms of both dollars and time, the researchers found. Due to unexpected confusion around supplies and equipment, the average surgery sees an additional 5-10 minutes added to its length, as well as wasting an average of $1,800 worth of supplies. Here and there, that may not seem like much, but taken together, it's a huge loss of efficiency and money.
With all this in mind, insurers may need to work more closely with both care providers and policyholders to find new areas of efficiency and cost-cutting, so people can get the care they need at a price they can afford.