Consumers Don’t Know What They Don’t Know About Healthcare Costs

The saving rate in the U.S. ranks among the lowest in the world, in a country that rates among the richest nations. So imagine how well Americans save for healthcare?

“Consumers are not disciplined about saving in general,” with saving for healthcare lagging behind other types of savings, Alegeus observes in the 2018 Alegeus Consumer Health & Financial Fluency Report.

Alegeus surveyed 1,400 U.S. healthcare consumers in September 2017 to gauge peoples’ views on healthcare finances, insurance, and levels of fluency.

As patients continue to take on more financial responsibility for healthcare spending in the U.S., they are struggling with finances and don’t believe they can save for medical expenses. One-half of Americans live paycheck to paycheck, Alegeus learned, and one-third have a problem with debt.

Exacerbating this picture of financial un-wellness among millions of Americans is the fact that consumers “don’t know what they don’t know” when it comes to how their health insurance works — that is, how to benefit from their health benefits.

One-half of people could not correctly answer simple questions about the definitions of a health premium or a deductible, for example. Thus Alegeus says that peoples’ overall health insurance fluency is low.

This lack of health financial literacy leads to real hard-dollar losses impacting health consumers’ pocketbooks. Americans’ estimated $371 billion out-of-pocket spending in 2018 could result in $85 bn in potential consumer savings were people to use pre-tax dollars conserved in financial and health savings accounts (FSAs and HSAs), Alegeus calculated.

Health Populi’s Hot Points:  Americans are stressed by out-of-pocket healthcare costs, the second chart shows, so there’s a double-whammy health effect here: first, financial, where people who could optimize healthcare spending by saving in an FSA or HSA. Second, a mental and potentially physical health impact from that financial stress.

The patient-as-payor lacks confidence and competence in being that envisioned consumer-directed-healthcare persona.

Thus Alegeus concludes that consumers need support to take a more active role in their healthcare, via tools, encouragement, access to information, time and knowledge.

At the root, though, will continue to be Americans’ low savings rates across-the-board, from simply saving for emergencies through healthcare — the lowest level of saving that Alegeus discovered as the first chart indicates.

 

In the U.S., saving would be a social determinant of health. This is a Catch-22 in America, because more people face first-dollar out-of-pocket costs in the face of fairly flat wage growth over the past decade.

While on a macroeconomic level, the nation’s economy is said to be well into recovery mode post-Recession, most Americans still don’t feel growth in their paychecks and disposable incomes.

The third chart illustrates the relatively low personal savings rate among U.S. consumers at the end of 2017. This has inched up above 6% in recent months of 2018, but still below 7%.

FYI and further knowledge, here’s an analysis from the IMF (International Monetary Fund) looking at the U.S. personal savings rate in a global context.

The bottom-line for American households: healthcare spending is an integral part of overall household spending, and leading to stress and self-rationing of care for millions of people — whether for EpiPens, cancer treatment, or simply (but profoundly, prevention-important) going to see a primary care provider.

Nudging people to save more overall – specifically for healthcare — will need a lot more than a clever digital tool and “knowledge.” We’ve known about the compelling triple-tax advantage of a health savings account since President Bush promoted them in 2006. Twelve years later, what looks fiscally compelling on paper just hasn’t inspired people to save more for much of anything — let alone healthcare expenses.

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