Extreme healthcare costs are leaving many Americans without the medical services they need to maintain wellness. Across the U.S., healthcare is growing less affordable for men and women, including those with employer-sponsored insurance (ESI).
With nearly 61% of non-elderly U.S. adults depending on their ESI plan to pay for essential health services, it’s more important than ever for employers to find ways to cut health expenditures.
Partnering with an experienced benefits consultant can help your organization manage healthcare costs despite economic instability.
Current State of Healthcare Affordability
Healthcare spending is on the rise, creating concern among the public. In 2022, U.S. health spending increased by 4.1% to $4.5 trillion, with health spending accounting for 17.3% of gross domestic product (GDP).
While the strain from inflation, labor shortages, and COVID-19 on the healthcare industry may be easing, National Health Expenditures (NHE) growth is projected to average 5.6% between 2023 to 2032.
Healthcare Affordability Index Findings
Recent findings from the Healthcare Affordability Index provide valuable insight into the current state of healthcare affordability. Nearly half of Americans are now struggling to afford healthcare services and prescription medications.
The Index revealed a record-low affordability rate of 55% in 2024, down from 61% in 2022. Families and employees are bearing the brunt of rising healthcare costs as insurance premiums continue to outpace wage increases.
Impact on Different Age Groups
Rising healthcare costs impact different age groups in various ways, but two main age groups remain the most affected. Adults between the ages of 50 and 64 are down eight points to 55%, while adults aged 65 and older have fallen eight points to 71%.
Adults under 50 are the most affected, with approximately 53% unable to cover their current healthcare costs. Unsurprisingly, unexpected medical bills rank as one of the top financial concerns for today’s families.
Contributing Factors
There are many reasons why healthcare costs continue to soar year after year. The U.S. healthcare system doesn’t use an integrated approach to medicine, often resulting in redundant testing, overprescribing, and overtreatment.
Medical providers often focus on quantity over quality, meaning the more patients they treat, the more revenue they generate. Other factors, such as a U.S. population that’s become more unhealthy and new healthcare technology that is more expensive, are also impacting healthcare costs.
Economic Influences
Inflation’s impact on the economy is also to blame for unaffordable healthcare. Inflation, which increased when patients returned to regular doctor visits after the pandemic, affects the costs of supplies, operations, facilities, and administration.
In addition, many healthcare facilities have been affected due to staff shortages and reduced wages for staff members. Employees are growing concerned that healthcare inflation will ultimately exceed their annual incomes.
Potential Solutions and Positive Developments
Finding solutions to rising healthcare costs can have many benefits, from improved access to care to greater financial stability. In the workplace, healthcare affordability can lead to increased productivity and better overall morale.
Many organizations have already begun implementing new strategies to lower healthcare costs, such as adopting telemedicine, using machine learning and AI, and incorporating value-based core models that focus on patient outcomes instead of number of patients served.
Legislative Measures
Several legislative measures have been implemented to help reduce healthcare expenses, including provisions in the Inflation Reduction Act of 2022.
The Act provides financial relief to people struggling with health coverage and prescriptions through strategic negotiations with drug companies and caps set on annual out-of-pocket drug costs.
The Inflation Reduction Act also guarantees that Medicare beneficiaries pay an out-of-pocket maximum of $35 per month for insulin.
Advocacy and Expert Opinions
West Health president Timothy Lash said about healthcare affordability in America, “High prices are one of the biggest impediments to a healthy aging population and a prosperous economy.”
He also shared, “Healthcare provisions, including empowering Medicare to negotiate lower drug prices, will help increase affordability, but we must go beyond that to ensure an illness doesn’t get worse or turn into a financial disaster for any American.”
Gallup senior researcher Dan Witters reflected on the findings of a recent Gallup Survey on Aging in America. “The year 2022 showed encouraging trends of increased health care affordability, post-pandemic,” he said. “The decline in 2024 is concerning in that it shows the fragility of American’s purchasing power amid a high-priced health care system.”
Learn How a Benefits Consultant from New City Can Help Keep Your Organization’s Healthcare Costs Low
Employers nationwide are facing job-based healthcare coverage increases that are quickly outpacing inflation. Many organizations are taking steps to help control costs, starting with changes to employee benefits and consulting with a benefits consultant.
At New City Insurance, we work with businesses to structure employee benefits to save money while maximizing employee perks. Contact New City today at 888.210.2765 to get started.