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Report: US out-of-pocket healthcare spending reaches $416 billion

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Report: US out-of-pocket healthcare spending reaches $416 billion

Companies increasingly add high-deductible plans.

According to a recent report from medical industry research firm Kalorama Information, the amount Americans spend on healthcare out of pocket reached$416 billion in 2014 and with growth of 8% will reach $608 billion by 2015.  Americans spend on three categories out of pocket: directly on expenditures, co-pays as part of office visits and hospital visits and drug purchases, and on premiums. 

"Premiums are the largest category of spending but co-payments and direct payments are growing," said Bruce Carlson, Publisher of Kalorama Information.

 "Prescription medications represent the single largest out-of-pocket health care expenditure for the average person."

Direct payments will demonstrate very strong growth at 9.5% per year, as employers increasingly add high deductible plans. Co-payments will also demonstrate healthy growth of 9.5% annually, as plans raise co-pay amounts and subject more products and services to co-payment. Premiums will expand by 7.1% per year overall. According to Hewitt Associates, HMOs in particular will seek double digit monthly premium increases as these plans suffer from an exodus of young, healthy employees to low premium, high deductible plans leaving a higher proportion of participants with health problems.

Kalorama notes that Consumers in the United States utilize a variety of methods to pay for health care products and services. These are required in instances when payment is not made directly from a health care plan directly to the provider. The key payment methods utilized are: - cash or check; - credit cards; - loans and lines of credit; - flexible spending accounts; - health savings accounts; - medical financing.  Prescription medications represent the single largest out-of-pocket health care expenditure for the average person, with Rx medications comprising 43% of total out-of-pocket health care costs. This is followed by office-based procedures, including examinations, vaccinations, etc., at 26%. Hospital stays comprised just 1% of the average person's out-of-pocket health care spending, although this is considerably higher for persons with the highest overall health care expenditures.

The report says that 50% or so of consumers who do not utilize health care services extensively are subject mainly to premiums and plan fees but do not often pay co-payments and rarely must meet deductibles; on the other hand, consumers with chronic conditions and those who otherwise utilize plan services frequently pay not only premiums and plan fees but also make frequent co-payments and often become subject to deductibles and plan coverage limits. For this latter group, co-pays, deductibles and direct payments after coverage limits have been reached can exceed premiums. 

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