Making the Connection: How Financial Advisors Help You Prepare for Rising Health Care Costs

Unexpected health care costs can catch anyone off guard, often leading to significant financial strain. With medical expenses rising and inflationary pressures affecting health care providers, it's more important than ever to be financially prepared for medical emergencies. With expert guidance from a financial advisor, you can proactively prepare for unexpected health care costs, ensuring you are not caught off guard during medical emergencies.

Current Trends in Health Care Spending

The financial outlook for health care is evolving rapidly due to increasing medical costs and inflationary pressures. According to PwC’s Health Research Institute, the medical cost trend is expected to reach 7% in 2024, up from 6.0% in 2023. This increase is mainly due to the impact of inflation on health care providers, who are among the top three contributors to inflation in 2024. In a high-inflation environment, hospitals and providers often feel the need to request significant rate hikes from payers, leading to higher costs for consumers.

In 2022, U.S. health care spending increased by 4.1% to reach $4.5 trillion, which averages $13,493 per person, according to the National Health Expenditure Accounts (NHEA). This expenditure represented 17.3% of the nation's Gross Domestic Product (GDP). The Office of the Actuary in the Centers for Medicare & Medicaid Services predicts that overall health care spending will continue to rise, reflecting increases in private health insurance spending, Medicare, Medicaid, and out-of-pocket costs.

Additionally, the uninsured rate remains a critical factor in health care. As of Q3 2023, the national uninsured rate for all ages was 7.7%, or 25.6 million individuals. That's a huge indicator of how vulnerable a significant portion of the population is to unexpected health spending, and it highlights the importance of financial preparedness and adequate health insurance coverage.

Why Financial Advisors Are Vital in Health Care Planning

Financial advisors play a key role in guiding people through strategies to safeguard their financial well-being against sudden health care expenses. By working with a financial advisor, you can consider options such as health insurance, savings plans, and investments to protect your financial well-being from sudden healthcare costs.

Strategic Savings

Building an emergency fund specifically for health care is crucial in financial planning. Given that 23% of adults experienced unexpected medical expenses in the last year, with the median amount falling between $1,000 and $1,999. Having a dedicated fund can help protect you financially against these costs. A financial advisor can guide you in setting up and growing this fund to ensure it's enough to cover potential medical emergencies. They can also help you allocate some of your funds specifically for health savings. This could involve setting up automatic transfers from your paycheck into a savings account for future medical needs.

Investing Advice

Investment strategies are another key area where financial advisors can provide valuable guidance. 61% of people who sought advice from a financial advisor reported improved investment decisions and increased earnings.

Advisors can help you identify investment opportunities that offer a balance of risk and return, tailored to the goal of saving for future medical expenses. Depending on the client's risk tolerance and financial goals, this might include a mix of low-risk investments like bonds and high-yield savings accounts and higher-risk options like stocks and mutual funds.

Choosing Insurance Plans

Health insurance is vital to managing routine medical costs and protecting against sizeable unexpected expenses. You can leverage private health insurance programs to alleviate the financial burden of health care services, hospital care, prescription drugs, and other medical expenditures.

Less than half of millennials have life insurance, and many are discouraged by tight budgets and the complex world of insurance options. As such, 50% of Gen Z, Millennials, and Gen Xers are considering delaying non-urgent medical care if the cost is between $500 and $999. With this in mind, it’s worth considering a plan that minimizes out-of-pocket expenses.

Financial Advisors can help you assess the coverage offered by various plans, considering factors such as premiums, deductibles, copayments, and out-of-pocket maximums. They also provide insights into the benefits and limitations of different plans, ensuring that clients choose options that offer the best health coverage for unexpected expenses. This personalized approach can help you avoid financial strain during medical emergencies, providing peace of mind and long-term financial stability.

Managing Debt

Managing existing medical debt is a critical aspect of financial planning. About 16% of adults owe money for their or a family member's medical bills, which shows that many people have to deal with the cost of staying healthy.

A financial advisor can help out by making a plan that lets you handle your medical expenses without giving up on saving money for other things you might need later. They know ways to make paying these bills easier, like talking to your doctors about reducing your debts or finding a payment plan that fits your budget.

Encouraging Behavioral Changes

Remember to prioritize your health with regular check-ups and preventive measures. It's not only beneficial for your body but also for your finances. By identifying potential health issues early, you can avoid costly medical expenses in the future. Taking control of your healthcare spending can prevent it from becoming unmanageable. Your financial advisor can also remind you about the connection between staying healthy and minimizing hospital care costs.

The Aligned Perspective: Advisor Help for Rising Health Care Costs

The increasing health care costs and inflationary pressures make financial preparedness more crucial than ever. Balancing savings for future medical expenses while managing existing debt is challenging but essential. Advisors provide the expertise needed to figure out these complexities and help you make informed decisions. As health care costs continue to rise, proactive financial planning is necessary. Are you ready to take control of your financial future and safeguard against unexpected medical costs?

Simple, strategic, and designed to give you clarity as you grow.