It may be obvious, but health care costs are on the rise. There are several reasons for these increases, some may even seem common sense to you. What is intriguing is not only how they affect you but how you can affect them.
Let?s look at some reasons why health care costs are rising.
- Prices are on the rise. Physician, hospital, prescription drug, pharmacy, and medical equipment costs are rising at a steady rate.
- Increase in use of medical technology. Individuals are utilizing, and demanding, more medical technology as it becomes available. For example, MRI?s are being utilized more frequently and cost about $1,000 every time they are used.
- Increase in biotechnology. People are using more prescription drugs, perhaps because of increased advertising in television, radio, and printed mediums. New prescription drugs are being invented all of the time but always come with a hefty price tag.
- People are living longer. It makes sense that the longer people live, the more medical attention they will require.
- Poor personal choices. Poor diet, lack of exercise, and riskier behaviors, are lending themselves to more trips to the doctor and emergency room.
- Cost shifting. Cost shifting occurs when people on private insurance are charged more than necessary for a service to make up for the lack of money paid by public insurance such as Medicaid. Let?s use the example of an MRI. If someone is covered by Medicaid and receives an MRI, Medicaid may decide to pay only half of it. The money to cover the remainder of the cost must come from somewhere. Hospitals and physicians charge private health plans more to make up the difference.
So where do you fit into this picture? As costs increase, many employers opt not to offer health insurance or to offer it to a limited number of employees. Individuals may opt not to purchase health insurance because the costs are too high. As people stop contributing to an insurance company, premiums must rise to make up for it. This may result in more people dropping out and thus even higher costs.
However, there is hope. For the insurance market as well as the consumer. As people pay more out-of-pocket expenses, and realize just how costly medical treatment is, they may make better personal decisions. For example, if smoking is causing you to visit the doctor once a month and requires you to purchase an inhaler, you may consider quitting smoking. Or, if your diet is causing you to have high cholesterol and now you have to pay out-of-pocket for cholesterol medication, you may consider changing your diet. These simple changes can result in a turnaround in medical treatment necessity and therefore reduce costs in the coming years.
Another possible result is that people realize just how much having health insurance actually saves them money. They may decide to again obtain health insurance. As more people get coverage, premium prices may stabilize. Now, according to our cycle theory, stabilizing costs should result in more people signing up for coverage and thus more affordable health insurance.
Now you have seen two insurance cost cycles, both the one we are currently in, and the one that would be better for all of us. You have the tools to help make that switch. You can use these tools, making better personal choices and purchasing health insurance, to help yourself and future generations.
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