When you get sick, you shouldn’t have to decide between medical care and rent. Medical costs are already unreasonable for 25 percent of Americans, and are getting worse every year. Pricey insurance and unexpected medical bills are a potential ticket to bankruptcy, and you have little power to protect yourself.
It’s Not Just You: Health Care Costs More Every Year
There isn’t just one bad guy here. Health care costs are increasing every year, for a collection of reasons that range from the boring to the scandalous.
For example, there’s a new move toward crazy expensive drug prices, like the $84,000 hepatitis C drug that singlehandedly accounted for 13% of the increase in drug spending in 2014. Lots of “specialty” drugs were born when manufacturers realized they could charge whatever they want. Expensive drugs are mostly paid for by insurance, and drug companies like it that way: the patient gets free or cheap drugs, and the insurance company foots the gigantic bill. Of course, that means we all pay for it in the end, through high premiums.
Hospitals have also driven prices up by gobbling up their competitors. If every hospital in your area is owned by the same giant company, you can’t get a deal by going somewhere else. Some hospital systems even run their own insurance policies, which reduces their costs without necessarily reducing your premiums.
Your dollars aren’t necessarily buying better care, either. Prices are whatever the provider and insurer negotiate. “That’s why you’ll see wildly different prices for the exact same procedure, even in the same town,” says Elizabeth Mitchell, president and CEO of the nonprofit Network for Regional Healthcare Improvement. “One hospital can charge $5,000 for a service where another might charge $1,200 for the exact same service with no meaningful difference in quality.” Shopping around has been proposed as a solution, but that doesn’t always work, as we’ll see.
In other words, a lot of players in health care have figured out they can charge a lot just because they can. That’s not the only reason costs go up, of course: there are also the boring reasons, like that medical technology has become more expensive as it has improved over time. Medical care in, say, 1950 was vastly cheaper than today, but nobody in their right mind would time-travel backwards for care. According to David Newman, executive director of the Health Care Cost Institute, other reasons include an aging population (old people use more health care) and economic prosperity (the richer we are, the more we’re willing to spend to extend our lives).
Insurance Doesn’t Buy Much Any More
Decades ago, Newman says, insurance paid most of a person’s health costs when they had a major expense. But insurance plans today often pass a lot of the cost of care on to you. The general term for this is cost sharing, and besides copayments, it includes co-insurance (you pay a percentage of your care) and deductibles (a hefty amount you have to pay out of pocket before full coverage kicks in).
The idea is that you’ll be a smarter consumer when you bear more of the cost. You’ll avoid unnecessary care, and you’ll choose cheaper options when you can. What began as a minor hurdle to be sure you really needed care, like a $10 copay for an office visit, has evolved into a massive liability for anybody unlucky enough to get sick.
Deductibles are getting huge, even with “good” insurance, and total out-of-pocket costs are also soaring, according to data from the Kaiser Family Foundation. (This doesn’t mean you should skip insurance, though. You’ll pay more in the tax penalty if you do, and you’ll miss out on deductible-exempt freebies.)
There’s no easy way out of this mess, says Newman—we pay for skyrocketing health costs one way or another. Plans with lower deductibles have higher premiums, and even if your employer foots the bill, that’s money they’re not spending on your wages.
There are plenty more pitfalls in health insurance cost structures. We’ve discussed a few to avoid, like high or nonexistent caps on out-of-network care. Another is reference pricing, where the insurer sets a cap for how much they will pay for a service. Great for them, sucks to be you. “It’s the most unfair shift that I’ve seen,” says Mitchell. They’re asking you to be an informed consumer when you may not have the ability or information to choose cost-effective care.
We Can’t Shop Our Way Out of This Mess
Here’s the worst thing I learned in researching this post: Hospitals and insurers can refuse to tell you their prices, citing confidential negotiations. That means you could call up the hospital and hear that they are not allowed to tell you how much your upcoming surgery will cost. “It’s not universal, but not uncommon,” says Mitchell.
If you’re lucky, you might have ways of finding out costs. Many insurance companies provide a cost estimator somewhere on their website, says Mitchell. Some states have all-payer claims databases that track how much people are actually paying for health care. Finally, there are databases anybody can use that give cost estimates. You may even be able to find cost information on your neighborhood hospital. If not, at least you can look at the national and state averages. Guroo, Clear Health Costs, and the Health Care Blue Book are good places to start.
But even if you do know how much something costs, you can’t always do much about it. Prices depend a lot on where you are: a surgery that costs $21,976 in Tucson, AZ costs $57,504 in Sacramento, CA. In some cases, the difference between two nearby cities may make a road trip worthwhile.
On top of that, “many things are not shoppable,” says Newman, based on a report by his Health Care Cost Institute that found only 43 percent of health care dollars (for people with private insurance) are spent on care that you could theoretically shop for. That number gets smaller when you think about people who are too sick to spend the energy shopping, or people who live in places where everything costs about the same.
The problems with health care costs may sound like a lot of bad news, but there are a few bright points. First, at least it’s possible for everyone to get insurance now: In 2015, only 9.2 percent of Americans didn’t have insurance. Even if you have to pay a lot out of pocket, you still benefit from negotiated rates. Mitchell says that while it’s always reasonable to try to negotiate a discount on your own, you’ll rarely get a deal as good as a big insurer will.
Similarly, you should still try to shop for care, even if you can’t manage to save much money that way. Do what you can, and consider setting up an HSA to help budget for your deductible. But if you find yourself still facing high costs, don’t feel bad. It’s not you, it’s the system.
Illustration by Sam Woolley