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How to Manage Medical Costs in a Time of High Inflation

Polling shows that the high cost of living is top of mind among Americans, with inflation and the cost of healthcare top of mind. In fact, recent studies indicate that nearly two-thirds of Americans think inflation is a very big problem in the country. At the same time, almost as many named the affordability of healthcare as a major concern.

Here’s a look at how inflation has affected medical costs — and how to keep your costs under control.

Inflation by the Numbers

The pandemic-era years saw the highest inflation numbers in more than three decades. The rate of inflation jumped to 4.7% in 2021, and in 2022, it reached a staggering 8.0%.

Fortunately, inflation is starting to slow down. The estimated rate of inflation for 2023 is 3.5%, far lower than the year before. However, elevated prices still impact Americans’ budgets in nearly every area. 

The Effects of Inflation on Healthcare Costs 

In the past year, medical costs were less affected by inflation than other consumer goods. The overall cost of medical care rose just 0.1% from June 2022 to June 2023, far lower than the overall inflation rate.

However, that does not mean healthcare is not affected by inflation. Increases in the costs of food, rent, utilities, and other basic needs have left consumers with less money in their household budgets. Nearly two-thirds of working-age adults say that inflation affected their family’s ability to pay for healthcare.

How Americans Are Dealing With Rising Healthcare Costs 

In a time of high inflation, Americans are using a variety of strategies to try to lower their healthcare costs.

Delaying or Skipping Needed Care 

In the past 12 months, 38% of Americans say they or a family member delayed or skipped necessary care for financial reasons. That includes substantial minorities of people with health insurance, including job-based plans and Marketplace plans

Skipping medically necessary care or not filling prescriptions can have serious implications for a person’s health. Among people who said they or a family member missed out on necessary care, 57% said a health problem worsened because of the delay.

Dropping Insurance 

Inflation in the economy has some Americans considering forgoing health insurance entirely. In the past 12 months, 16% of working-age Americans say they or a family member considered canceling their health insurance plan. Another 5% say they ended their coverage.

While dropping coverage may result in savings in the short term, there are other costs to consider. People without insurance are far more likely to report delaying or skipping care they need because they cannot afford it.

Downgrading Health Insurance

For some people, it’s tempting to downgrade to a lower-cost health insurance plan rather than dropping coverage entirely. For example, a person might switch from a plan with high monthly premiums to a plan with lower premiums.

If you want to switch plans, look carefully at how each plan covers costs. Plans with lower premiums tend to have higher deductibles and higher costs when you get care, which may cancel out the potential savings.

Alternative Ways to Reduce Healthcare Costs 

Skipping or delaying necessary care, dropping health insurance coverage, or downgrading your coverage are not the only options for controlling costs. Consider the following alternatives to reduce healthcare costs without risking your health.

Understand Your Health Insurance Plan 

Review your plan’s rules to understand how to maximize your coverage. For example, some plans do not cover out-of-network providers, while others charge more for out-of-network care. Choosing providers who take your health plan can help you control costs.

Most health plans cover a set of preventive services at no cost, such as blood pressure screenings and immunizations. Taking advantage of these benefits can help consumers stay healthy and catch problems at an earlier stage. 

Check Your Bills for Errors 

Medical billing errors are unfortunately common: One study found that as many as 80% of bills contained mistakes. Some examples of billing errors include duplicate charges for the same test or being billed for a service you did not receive.

To find errors, ask for an itemized bill of the services you received and the providers you saw. Compare the bill to your plan’s explanation of benefits to make sure the insurer paid the correct amount. Report any errors to your healthcare provider or insurer.

Take Advantage of Your HSA or FSA 

Health savings accounts (HSA) and flexible spending accounts (FSA) are two types of tax-advantaged accounts for people with health insurance. They’re often offered by employers or through insurers themselves. However, they differ in that HSAs only work with high-deductible health plans, while FSAs can be paired with low-deductible plans.

Both accounts let consumers set aside pre-tax money to pay for their upcoming healthcare needs. Withdrawals are not taxable so long as the money is spent on eligible medical expenses. The potential savings vary based on your tax rate.

Look Into Assistance Programs 

People who are having trouble paying for healthcare due to inflation may be eligible for help from public programs. Medicaid is one of the largest programs, with more than 83 million enrollees. It offers free or low-cost health coverage to eligible low-income people and families.

However, people who are not eligible for Medicaid have other options. Those who buy coverage through the Marketplace may be eligible for subsidies to lower their monthly premiums or reduce their deductibles and other out-of-pocket costs. Further, state pharmaceutical assistance programs are another option for those who have trouble with drug costs.

Take Care of Your Health

Chronic diseases — like heart disease, cancer, and diabetes — are one of the main contributors to healthcare costs in the United States. Most chronic diseases can be prevented with healthy lifestyle habits, such as eating a nutritious diet, getting enough exercise, and avoiding tobacco.

For the 6 in 10 Americans who already have at least one chronic disease, managing the condition can help prevent complications and high healthcare costs. Work with your doctor and other members of your care team to control your condition and keep your costs down.

The Takeaway 

The inflation rate has dropped significantly, but elevated prices are still a problem for Americans’ budgets. Fortunately, there are many ways to keep healthcare costs under control without resorting to drastic steps like canceling health insurance coverage. If your current plan no longer fits your budget, work with a trusted agent to explore alternatives.

You’re just a few steps away from a personalized health insurance quote.

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You’re just a few steps away from a personalized health insurance quote.

Learn More