Health Insurance Squeezing Your Family Budget?

Health Insurance
Isn’t Just Washington’s Concern

Health Insurance Does Not Insure Health (Photo credit: SavaTheAggie)

After all the high-profile media attention paid to the health insurance politics of Obamacare, many Americans have been lulled into thinking of healthcare costs as a political football with little direct impact on their own lives.

This will change for those newly-required to purchase health insurance starting next January – although  the penalties for not doing so aren’t that onerous – and for those newly-insured via an expanded Medicaid program in those states that choose to participate.

But whether they realize it yet or not, every American will soon face a budget crunch from the squeeze that unrelenting growth in healthcare costs is placing on their ability to afford the other necessities and niceties of life.

An article in The Washington Post illustrated that it’s healthcare spending, not Social Security or anything else, that’s crowding out other national spending priorities. The same will also apply to your family budget.

As this graph clearly illustrates, American workers are directly bearing more of the financial burden of their healthcare costs.

Hospital Billing Chicanery

Steven Brill’s recent and wildly popular article in TIME – “Bitter Pill: Why Medical Bills Are Killing Us” – explores how much of this increased financial burden is due to hospital billing chicanery that ought to be outlawed. Since I wouldn’t advise holding your breath for that to occur, you may need to find other ways to avoid getting slapped with a six-figure hospital bill and dozens of doctors’ and ancillary bills for tens of thousands more.

According to the latest government figures, “In 2010, the average total payment from all sources (private insurance, Medicare, Medicaid, out-of-pocket payments, and other miscellaneous sources) for a hospital inpatient stay was $13,131″. Total healthcare costs for a family of four – counting health insurance premiums and out-of-pocket costs – exceeded $20,000 a year in America for the first time in 2012.

That’s a $5,000 a year increase in only three years time – or about 33% – during a period when healthcare spending increases had actually moderated. Another 33% increase over the next three years will take this close to $30,000 a year.

This, of course, translates into higher insurance premiums. It’s also likely to result in higher insurance deductibles to keep premiums from escalating even faster, as well as more co-insurance in which employees pay a percentage of their medical bills rather a fixed deductible payment.

Looking Beyond Your Health Insurance

So unless you have gold-plated health insurance, you’ll need to start paying greater attention to your healthcare usage. This means looking beyond your health insurance costs to your actual need for all the medical interventions recommended for you and your family.

We all know by now that a third or more of our healthcare spending is unnecessary. By being more assertive and skeptical patient-consumers, we can keep our medical costs down and may need less insurance as a result.

If you haven’t viewed the brief video by Dr. David Belk on the home page of Our Healthcare Sucks, I recommend you do so. He explains how many of our medical bills are inflated by ten times and more – something that’s corroborated by the TIME article as well.

While health insurance premium increases have moderated somewhat nationally, employees’ contributions to their insurance premiums continue to increase at a far greater pace than their wages. This is unlikely to improve anytime soon given poor employment conditions and lack of employee negotiating leverage in such an economic climate.

This is reflected in the fact that 14,000 Americans lose their employer-sponsored health insurance every day.

Maybe our daddies’ generous employer-based health coverage was too good to last. It certainly didn’t promote the kind of smart consumerism we see in other parts of our economy.

Eroding Insurance

Many experts attribute much of our historic rises in medical spending to a consumer culture that’s been insulated from the costs of their care by generous third-party health insurance that covered far more minor needs than other forms of insurance.

That insulation from healthcare costs is rapidly eroding, however, as consumers are increasingly paying for the exorbitant costs associated with high-tech medical procedures they’ve come to expect and demand.

Middle-aged and older adults paying for their families’ health insurance can easily expect to pay over a $1,000 a month in premiums – before adding increasing out-of-pocket costs for deductibles, co-pays, and uncovered services.

Even those with employer-sponsored health insurance are now paying an average of over $4,000 a year of their health insurance premiums for family coverage and another $600 or more in deductible expenses.

The cost of health insurance is no longer an afterthought for most Americans and Obamacare will have little effect on that.

It may even make it worse.

With many Americans now forced to buy insurance that will be re-priced to preserve profitability for insurance companies, the financial pressures on medical consumers will likely grow even stronger under well-intentioned but grossly inadequate reform measures that survived in Obamacare.

More Self-Insurance Means
Reprioritizing Your Spending

Consumers will have to find ways to survive these cost pressures despite government interventions. A good place to start is with your current spending on insurance, co-payments and deductibles, and other out-of-pocket healthcare costs.

Given the toll medical expenses take on family budgets, reconsidering how and where you spend your healthcare dollars is more than sound financial planning; it’s an essential first step to reprioritizing your spending to survive the coming financial crisis in healthcare.

Perhaps more important, however, is learning how to reduce your need for the most expensive coverage.

Even those on Medicare have difficult choices to make. Enlist the help of a friend or family member, if necessary, to sort out matters that often seem purposely confusing so easy comparison among plan choices is all but impossible. This is one area – transparency – where the health exchanges provided for under Obamacare should help.

Although health reform will help with transparency, its impact on medical spending and insurance premiums is uncertain.

One thing is clear, however: neither the government nor the healthcare industry is capable of making the kind of wholesale changes needed to make our healthcare more affordable.

Employees’ health costs are growing at 3-4 times their wages. This reflects our new high-deductible, more-out-of-pocket financial reality. This means we’re all in the self-insurance business now whether we like it or not.

It’s up to each of us as medical consumers to take control of this out-of-control situation to avoid financial calamity for our families. And it starts with a fundamental rethinking of both our health insurance and our unquestioning reliance on a dysfunctional healthcare system.

John Lynch: John Lynch was founder and CEO of Medical Diagnostics, Inc. - twice named to Business Week's "Best Small Companies" in America. He's since founded MedSmart Members to publish consumer health education publications.
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