Inflation affects the cost of everything in recent years — from housing to healthcare.
According to Wayne Winegarden, an economist at the Pacific Research Institute, while overall inflation increased by 20% since January 2021, medical inflation rose by only 8%.
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“Medical prices have been growing faster than overall inflation for decades,” Winegarden said. “The inflation did create extreme affordability problems for families, which can heighten the problems of healthcare costs. After paying for food and utilities, there is just less income available to cover unexpected medical expenses.”
By being proactive, maximizing your health insurance coverage and exploring ways to save money, you can stay ahead of the rising prices.
Here are four ways to plan for healthcare costs in an inflationary economy.
Understand Your Healthcare Coverage
Review your current health insurance policy in detail to stay ahead of the curve. Rising healthcare costs can also lead to increased premiums, higher deductibles and higher out-of-pocket expenses.
Make sure you know what your plan covers and identify any gaps in coverage. If you’re close to the enrollment period, take time to compare different healthcare plans and adjust the coverage to meet anticipated needs.
“Health Savings Accounts are only available if you also have a High-Deductible Health Plan,” said Jordan Teel, CEO of Everly, a life insurance company. “You may want to consider purchasing an annuity with features that can accelerate payments in cases of major medical events.”
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Budget for Increased Costs
Review your average healthcare spending and round it up to account for inflation. For example, if you typically spend $120 on a doctor’s visit, increase that amount by 3 to 5% and account for it in your healthcare expenses.
“It is important also to consider how your healthcare has been during your working years and make adjustments to the long-term plan,” said Jessi Chadd, chief wealth officer at Aspyre Wealth Partners. “Things to consider are ongoing conditions that require specialists or procedures, dental care, vision care, family history, and personal health history.”
Remember to plan for the unexpected. According to the National Institutes of Health (NIH), healthcare costs increase exponentially after the age of 50. Older adults (ages 85 and up) consume three times as much healthcare per person as those ages 65 to 74.
“The single biggest expense in retirement is healthcare,” said Paul Tyler, host of “That Annuity Show” podcast. “Unexpected expenses related to poor health habits can lead to surprise expenses and even bankruptcy in later retirement.”
Get Proactive
According to a Kaiser Family Foundation study, “Research has shown that evidence-based preventative services can save lives and improve health by identifying illnesses earlier, and treating them before they develop into more complicated, debilitating conditions.”
You can do your part by taking advantage of routine physicals, vaccinations and early screenings covered by your health insurance plan.
“The U.S. Medicare system tends to be affordable for most of the people I talk with,” Chadd said. “There are certain things that are not covered, like superior lens for cataract surgery. But, overall, my clients tell me they love Medicare and the coverage. What is hard to predict is how this system will continue to evolve over time.”
Shop Around for Medications and Services
Inflation affects prescription drug costs, Winegarden said. The current pricing system is opaque and can lead to “bizarre” outcomes.
Winegarden explained that pharmacy benefit managers (PBMs) work for insurance companies, which are typically now part of the same conglomerate, to negotiate discounts off the list price of drugs.
“The price most insurers pay is about one-half of the list price,” Winegarden said. “Patients, on the other hand, pay their co-insurance rates off of the inflated list prices. This means patients costs are inflated while insurance costs are well-controlled.”
While you can’t control drug pricing, you can shop around for lower prices by using comparison tools or discount programs to find better deals. If possible, consider generic alternatives to brand-name drugs, which can reduce your overall healthcare costs while maintaining your standard of care.
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This article originally appeared on GOBankingRates.com: 4 Ways To Plan for Healthcare Costs in an Inflationary Economy
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