The Rising Costs of Health Care
by Tracy E. Hill, Ph.D.
While running on the treadmill recently, I saw a commercial for a credit card that promised “cash back” and a business man who received $36,000 cash back on his card. He said he used the money to pay for his employees health care. That seemed like a whole lot of money to me and a bit far fetched if I might say. But it got me thinking about health care costs, which seem inordinately expensive for employers and employees. Most folks I know that receive annual raises at work complain that the yearly raise doesn’t even cover the annual increase in health care costs-so it’s basically a wash. So why and how are health care costs rising so fast and how does it affect Silver Sagers?
There seem to be several main reasons why health care costs are rising. These include: rising pharmaceutical prices; fewer health care plans available to consumers; rise in aging population, obesity and other chronic illnesses including addiction; and of course, increased medical costs. And unfortunately, these increased costs are not slowing down in the near future.
According to CMS (Centers for Medicare and Medicaid Services), Medicare and private health insurance grew 4.2% in 2017 and is expected to grow 5.5% over the next several years. And not surprisingly, healthcare costs (per person) in the United States are more expensive than any other country (by more than 25%) and the only industrialized country not to have universal health care. Who pays for health care? According to the California Healthcare Foundation, health care costs are split three ways: the government (Medicare, Medicaid, VA, etc.) pays more than 70%, employers chip in more than 20% of health care costs and the individual usually spends an average of close to 11% per year on health care costs. When there is no government sponsored health care (those not retired or on government benefits), the employers typically put in more than 80% of a family’s health care costs. For those still working, this is great news. Yet, if pay raises are only covering the increase in health care, employees aren’t really getting anywhere in the scheme of things.
Additionally, health care providers liability insurance is increasing at an alarming rate. According to the Houston Chronicle (July 2018), doctors spend one tenth of every dollar on malpractice insurance and the rates are climbing more than 9% each year. Premiums can vary depending on specialty and location from $7,000 annually to more than $200,000 in high-cost states such as California and New York. This has a direct impact on the costs of health care that we all spend our money on.
Rising retirement health care costs and a fixed income for many older folks this can put a dent in one’s purchasing and spending power. According to Money, a couple retiring at 65 today will spend close to $12,000 on medical costs. Yet by age 85, those expenses will skyrocket to more than $30,000 per year, a huge 170% increase over twenty years. It is estimated that health care will account for more than 70% of a 45 year old couple’s benefits and 45% of a typical sixty-something couple’s Social Security benefits. So how do we plan for such an outlay of cash?
Three most important things that come to mind, although I’m not a financial adviser:
- Maintain physical health. It’s important to eat smart, exercise and get the appropriate amount of rest.
- Stay emotionally healthy. Keep your mind active, maintain a social life and seek counseling if appropriate. Notwithstanding, counseling is good for everyone and anyone!
- Keep financially fit. Make sure you use a trusted financial adviser (e.g. Edward Jones) and review your finances annually. Save for retirement, rainy days and potential disasters.
If you have any other suggestions as to how to decrease health care costs or thoughts on the rise of medical expenses and health insurance, I’d love to hear from you. Post your comments here: https://www.facebook.com/silversagemagazine/.
Art credits by: “Healthcare” by Brownguy1 at Deviantart.com.