Health insurance is confusing for most Americans, but understanding your policy could save you thousands.
Health care spending per person increased 18.4% from 2014 to 2018, from $4,978 to $5,892, according to the 2018 Health Care Cost and Utilization Report by the Health Care Cost Institute. Out-of-pocket spending also increased by 14.5% over the same period.
“It’s a trend that isn’t seeming to slow down,” said Katie Keith, a faculty member of the Georgetown University Center on Health Insurance Reforms.
The popularity of high deductible plans may partly be to blame.
The number of Americans enrolled in these plans rose from 25.8% in 2014 to 33.5% in 2018, according to the study. Such plans require individuals to pay out of pocket for all health care costs up to their deductible amount. But many Americans don’t have enough savings to cover their deductible.
“People are really struggling with these deductibles that are only rising,” said Keith.
Rising prescription drug costs drive spending
Patient spending increased the most for prescription drugs, up 25.8% from 2014 to 2018.
Most prices, including retail, homes and health care, typically increase each year, thanks to inflation. But prescription costs vastly outpace the inflation rate, which typically hovers around 2%.
“There’s no real reason for prices to go up like they do,” said Caitlin Donovan, spokeswoman for the National Patient Advocate Foundation. “They are basically made up.”
Some prescription drugs target niche groups, like insulin for diabetics. Because these drugs are a necessity to those who use it and there aren’t price regulations, drugmakers can basically charge whatever they want, said Donovan. “When there’s nothing else like it on the market, you see hugely inflated prices.”
Case in point: Insulin costs have increased 1200% since the drug was created.
Is it possible to avoid high health care costs?
The obvious solution to avoid overspending on health care is to “stay healthy,” said Donovan. But that is not possible for everyone.
“We put the onus on patients to stay healthy and thus avoid using the health care system,” she said. “It’s a huge systemic problem. Prices won’t stop rising when there’s nothing to stop them from rising.”
Until regulation takes place, consumers can rely on easy-to-accomplish moves to keep a cap on health care spending:
Stay in-network The best way to save on procedures is by staying in your insurance network. If you’re getting an operation, confirm each specialist is in-network (some may not be). Shop around for the best price for medical services using health care price transparency tools like Fair Health or Healthcare Bluebook.
Use an health savings account Those with a HDHP can use a HSA to save on medical expenses. Contributions and withdrawals are tax-free, as long as it's used for medical expenses. Contributions can roll over year over year. We have a full explainer here.
Switch to generic If you have an expensive prescription, talk to your doctor about switching to the generic form of the drug. Generic manufacturers usually sell their drugs at 80% to 85% less than brand-name versions, according to the FDA. Not all drugs have generic forms (especially if they are newer) but it doesn’t hurt to ask.
Negotiate If you get a surprise medical bill, talk to your provider about lowering the amount or paying in installments. Always discuss costs with providers before paying.
Want to learn more? Check out our health insurance learn center, covering the ins and outs of your policy.