Health Care Costs Will Likely Increase Due to Inflation
People are noticing the effects of inflation on costs for necessities, such as groceries and utilities. However, evidence suggests it will impact health care costs, too.
Health Care Costs Were Causing Strain Even Before the Pandemic
A study from the Center for the New Middle Class looked at Americans’ experiences with rising costs and inflation and categorized them by their borrower classification. Before the pandemic, 21% of non-prime households reported feeling a lot of strain due to out-of-pocket health care expenses. Then, when researchers revisited their experiences from October 2021 to February 2022, there was a 10% increase in people from that group reporting that outcome.
Regarding the health insurance premiums for non-prime households, 16% felt a lot of strain before the pandemic and there was a 9% increase in people saying so from October 2021 to February 2022.
The story was similar for prime households, with 20% feeling under a lot of strain from out-of-pocket health care costs before the pandemic, and an additional 3% indicating that in the later period studied. For health insurance premiums, specifically, 19% of prime households felt the pinch before the pandemic, while an additional 2% did from October 2021 to February 2022.
Pandemic-Related Costs Will Continue in 2022
A 2022 PwC report also noted several pandemic-related factors expected to raise health care costs throughout 2022. For example, the study showed that 15% of Americans with employer-sponsored health insurance opted to delay getting care between March and September 2020. The analysts expect that health care spending will increase as they decide to get it this year.
The study also mentioned how the pandemic caused a decline in population-related health, particularly as people increased their smoking, drinking, and unhealthy eating habits to cope with stress. Those changes may make health care spending rise.
Another factor covered in the report was the costs associated with COVID-19 care, testing, and vaccinations. The virus is not going away, and it has mutated regularly since epidemiologists first began tracking it. Thus, the expenses associated with managing COVID-19 will remain present in 2022.
A final element brought up in the report was that the pandemic increased the need for mental health care while exacerbating the substance use crisis. These things will cause health care costs to climb as inflation persists.
Hospitals Dealing With Inflation Challenges, Too
Many people outside the health care industry are unaware of the sheer number of supply purchases needed to keep a hospital operational. The professionals responsible for purchasing must be mindful of which products are most economical while understanding the end-use.
For example, polypropylene is a thermoplastic with an exceptionally high melting point. It only begins to soften at approximately 155 degrees Celsius, making it a good choice for vials sterilized by autoclave. The pandemic also made it more difficult for hospitals to secure some high-demand items, such as personal protective equipment (PPE).
An April 2022 study from the American Hospital Association highlighted how hospital administrators experience burdens caused by inflation and related issues. It included a chart displaying the change in hospital costs for certain items between 2019 and 2021. For example, there was a 20.6% jump in per-patient expenses for supplies and a 36.9% rise in drug-related ones.
The researchers pointed out several ways that general inflation could negatively affect hospital prices. Raw goods shortages might force staff members to implement workarounds. Health care facilities may also need to increase their labor budgets. As inflation makes living costs climb, people in the workforce tend to demand higher salaries to compensate.
The study also suggested inflation could reduce health care demand, especially as consumers increasingly must make tough choices about how to spend their income. That effect could hurt hospital revenues. That’s also potentially problematic due to the interconnected nature of individual and community health. If someone has a highly contagious disease and continues to go to work and do other daily activities, they could help trigger a local outbreak.
Retirees Face Higher-Than-Expected and Climbing Health Care Costs
A 2022 study showed that retired persons significantly underestimate their health care costs. That could mean they’re at a higher risk as inflation continues. More specifically, the research indicated that a 65-year-old couple retiring in 2022 should expect to have $315,000 in health care and medical costs throughout their retirement periods.
The analysts confirmed that was a 5% increase over the 2021 estimate and nearly double the anticipated expenses for people in 2002.
The research revealed that the average American couple estimates they will only need $41,000 for their health care retirement costs. It’s not surprising, then, that, once the respondents heard the researchers’ 2022 estimate, 70% said they felt unprepared to cover their health care expenses.
Then a 2021 study on the effect of health care costs on retired people anticipated that the trend of health care inflation rising more quickly than overall inflation would continue. It clarified that people should expect it to increase two to two-and-a-half times faster. That study estimated a healthy 65-year-old couple retiring in 2021 should plan to spend $662,156 for their total projected lifetime health care costs.
Moreover, the research suggested that couples should expect their blended average annual health care costs to climb by 5.9% due to inflation for each of their retirement years. The study also advocated for personal health care planning.
It mentioned that the couple in the scenario could expect to spend anywhere from $156,208 to $1,022,997 on their medical needs in retirement. Where the couple falls in that range depends on things such as their coverage choices and whether they have chronic conditions.
Potential Effects at Every Level
This overview shows why inflation-related rises in health care costs will likely affect every level of society. There’s no way to stop those from happening, but people should, if they’re able, try to adjust their budgets to make the eventual impacts as bearable as possible.
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