Americans Are Paying More Than They Used to for Healthcare
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Here's your money briefing for Monday, December 30th. I'm J.R. Whalen for The Wall Street Journal. Last week, we focused on setting and keeping money goals for the new year. For many people trying to manage their household funds, that's no easy feat when they work in the rising cost of health care.
It's a sizable chunk of Americans' budget. It's less than they spend on things like rent and transport and food. But it's definitely more than other categories that the Labor Department measures, like education, for instance, or entertainment.
Wall Street Journal economics reporter Harriet Torrey will explain why health care costs keep rising and what we can expect in 2025. After the break.
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How much did U.S. healthcare spending increase in 2023 and why does it matter?
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The cost of medical care has risen roughly 40% faster than the overall pace of inflation. Wall Street Journal economics reporter Harriet Torrey joins me. Harriet, how does the amount Americans typically spend on health care compare to other household expenses?
About 8% of American spending goes on health care. So that would include the cost of insurance, monthly insurance premiums and so on, and also things that they have to buy for health care needs, everything from prescription drugs to a nebulizer to a box of Band-Aids. It's a sizable chunk of Americans' budget. It's less than they spend on things like rent and transport and food, but it's definitely more than other categories that the Labor Department measures, like education, for instance, or entertainment.
What do the numbers look like for Americans who get health insurance through their job?
Most Americans get health insurance through their job, about 60% of them. And people usually see the premium as the standout, eye-catching expense. When you look at your paycheck every month, you see the money that's coming out. And if you have your healthcare through a job, that's about $114 if you're just paying for yourself. And if you're doing a family premium, it's about $525. That's according to the healthcare nonprofit KFF. Again, those numbers are up considerably, about 30% from a decade ago.
Are companies picking up any of those higher costs?
Yes, they are. Companies have been shouldering a lot of those costs. So the average worker spent about $6,300 on premiums for family coverage. And for employers, the cost was nearly $20,000. Companies are taking on some of that cost, but ultimately, economists say that really everyone ends up paying because if a company has to spend more money on healthcare premiums, that means there's less money left over to give out raises, for instance, or to spend on development and things like that.
We've also seen a jump in costs for things like routine care at hospital outpatient centers. What has driven up those expenses?
There are a few factors contributing to that. One thing that we have seen in that industry is consolidation. We've also just seen a very steep increase in labour costs, much of it because of the healthcare pandemic. Inflation for healthcare does tend to run above overall CPI inflation. That's typical over many years. And that is often due to wage costs because healthcare is a very labour-intensive industry. When you think of the type of work that nurses and doctors do, it's hard to automate. You need someone to give you an IV or patch you up, whatever it might be. So there are a lot of people who work in health care.
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