U.S. consumers’ per capita, out-of-pocket expenditures for healthcare increased from $1,030.80 in 2012 to $1,314.60 in 2021, according to the Peterson-KFF Health Tracker System. 2012: $1,030.80. 2013: $1,048.30. 2014: $1,071.50. 2015: $1,103.30. 2016: $1,133.70. 2017: $1,148.10. 2018: $1,184.80. 2019: $1,228.60. 2020: $1,239.90. 2021: $1,314.60.
Any discussion of healthcare costs would be incomplete without mentioning the rising cost of prescription drugs. According to a report on drug price increases from the U.S. Department of Health and Human Services, from July 2021 to July 2022:
- The average price increase for 1,216 drugs was 31.6% (compared with an inflation rate of 8.5%).
- The prices of some individual drugs increased by at least 100%. Examples included drugs to address health issues such as chronic heart failure and hypertension.
The overall cost of healthcare in the U.S. does not compare favorably with costs in other wealthy countries. A report by the Peterson Center on Healthcare and KFF comparing healthcare costs around the world found that:
- On average, the U.S. spends more than twice as much per person on healthcare than other large, wealthy countries.
- In 2021, U.S. healthcare expenditures represented 18.3% of gross domestic product, while the average percentage in other comparable countries was 11.4%.
An Aging Population and Chronic Disease Are Affecting Healthcare Costs
Certain attributes of the U.S. population also are affecting the cost of healthcare. For example:
- The population is aging. Life expectancy at birth will increase from 77.1 to 82.3 from 2022 to 2052, according to the Congressional Budget Office (CBO). The CBO estimates that roughly one-third of the projected increase in spending on major healthcare programs during that time period will be due to our aging population.
- Chronic disease is prevalent. Chronic diseases are the primary drivers of U.S. healthcare costs, the U.S. Centers for Disease Control and Prevention (CDC) report. They cite diabetes as the most expensive chronic disease: $1 out of every $4 in healthcare costs is related to caring for individuals who have diabetes.
The Consequences of the High Cost of Healthcare
The toll that high healthcare costs take shows why it’s important to reduce healthcare costs. The consequences of high healthcare costs are sobering. For example, people have:
- Postponed medical treatment. Thirty-eight percent of Americans reported that they or a member of their family had postponed medical treatment because of the associated cost, according to a 2022 Gallup poll. That percentage was 26% in 2021.
- Skipped prescriptions or did not take medicine as prescribed. Due to the cost of prescription medication, 29% of respondents had not filled a prescription, taken over-the-counter medicine in lieu of a prescription, cut prescribed pills in half, and/or skipped doses of a prescription, according to a 2022 KFF survey on prescription drugs.
The high cost of healthcare affects minorities and people who have relatively low incomes more than other demographic groups. For example, results of a separate 2022 KFF survey on healthcare costs found the following:
- Individuals reporting that it was somewhat or very difficult to afford healthcare by race/ethnicity:
- 39% of white respondents
- 60% of Black respondents
- 65% of Hispanic respondents
- Individuals reporting that it was somewhat or very difficult to afford healthcare by household income:
- 21% of respondents whose annual salary was at least $90,000
- 49% of respondents whose annual salary was between $40,000 and $89,900
- 69% of respondents whose annual salary was less than $40,000
7 Ways for You to Reduce Healthcare Costs
Healthcare consumers have a number of ways to fight the high cost of healthcare. Becoming familiar with strategies to reduce healthcare costs and how to save money on healthcare is the first step in paying less to achieve good health. Examples of cost-saving approaches are outlined below.
1. Get Routine Screenings and Preventive Care
It’s important to take advantage of any healthcare benefits you may have to get routine health screenings and preventive care. Not only can this keep you healthy, but it also can identify health issues early and therefore reduce healthcare costs. People frequently pay no copay for services such as health screenings, regular well visits, and vaccines, the National Library of Medicine’s MedlinePlus service notes.
Even if you have insurance, out-of-pocket expenditures associated with common health issues such as cancer can add up. For example, the average annual, out-of-pocket cost for breast cancer patients who had health insurance was $1,502 (in terms of 2022 dollars), according to a report in JAMA Network Open. Regular mammograms can help to reduce those costs. The cost to treat breast cancer that is diagnosed early is significantly lower than the cost of treatment for late-stage breast cancer, according to the U.S. Centers for Disease Control and Prevention.
2. Be Careful to See In-Network Providers
It’s also important to see healthcare providers that are in your health insurer’s specified network. When health insurance marketplace eHealth surveyed 6,500 healthcare consumers in 2022, it found that 20% of those surveyed had gone to out-of-network providers. Those consumers spent an average of about $900 more for healthcare than consumers who saw only in-network providers.
Consumers can take several actions to help ensure they remain within a network of providers. For example, eHealth recommends the following:
- If you have the opportunity to shop for health insurance or choose among employer-offered health insurance plans, review provider network information carefully. This can help you determine, for example, whether the network includes a provider you prefer or whether in-network providers are located nearby.
- Become informed about how your health insurance handles emergency situations. For example, some insurers may waive additional fees for out-of-network providers that you visit in an emergency. However, after those providers discharge you, insurers may not cover additional care from those providers.
3. Know Your Health Insurer’s Rules
Becoming educated about your health insurer’s rules also can help decrease healthcare costs. For example, your insurer may have rules requiring you to:
- Obtain prior authorization from your insurer before getting a medical procedure. If you don’t obtain the required prior approval, the insurer can refuse to pay for your treatment, and you will be responsible for paying the costs.
- Obtain a referral from your primary care physician to see a specialist. Failure to secure a required referral could result in your insurer’s refusing to cover the cost of a specialist visit.
4. Review Whether Your Healthcare Expenditures Are Tax Deductible
Don’t forget that if your annual expenditures on healthcare exceed a certain threshold, you can take a federal income tax deduction. Specifically, for tax year 2022, the U.S. Internal Revenue Service reports that you can deduct the portion of your medical and dental expenses that exceeds 7.5% of your adjusted gross income.
NerdWallet offers an example of this deduction in action. If your adjusted gross income is $40,000, then you could deduct any healthcare expenditures in excess of $3,000 (7.5% of $40,000). If your healthcare expenditures totaled $10,000, for example, you could deduct $7,000 (the amount in excess of the $3,000 threshold).
5. Use the Emergency Department Appropriately
If you have a medical emergency, of course it’s important to visit an emergency department. But visiting emergency departments for convenience in nonemergency scenarios can be expensive. MedlinePlus reminds healthcare consumers that:
- The cost of care in an emergency department can be two to three times the cost of the same care at your provider’s office.
- Health insurers may set higher copayments for emergency department care than for care in a provider’s office.
6. Act on Your Own to Maintain Your Health
Committing to regular exercise, if you are able, and adopting a nutritious diet not only promotes better health, it also can go a long way toward reducing healthcare costs in the long run. For example, according to the CDC:
Some health insurance companies offer wellness programs that can boost your health and provide financial incentives such as:
- Financial rewards for completing activities such as health screenings and wellness exams
- Discounts on gym memberships
- Discounts on weight loss programs
7. Use Your Health Savings Account
Health savings accounts (HSAs) also are a great way to make your money go further. Depending on their tax bracket, individuals who fund their HSAs with the maximum allowable amount could save between about $700 and $1,300 each year.
HSAs enable consumers to set aside pre-tax dollars to pay for qualified medical expenses. In some cases, employers also contribute to their employees’ HSAs. The advantages of HSAs make them worthy of any consumer’s consideration.