In the U.S. today, it only takes a single medical issue to drain your bank account and force you to put major life events on hold.
For Sam, who asked to be identified by a pseudonym, helping a loved one cope with substance abuse wiped out tens of thousands in savings, along with any financial security. "I have pretty good health coverage (or so I thought), and I'm thankful for it or else I'd probably be over $100,000 in debt," Sam, a thirty-something, tells CNBC Make It.
But even with good health insurance, the bills piled up. Between the insurance deductible and the plan's out-of-pocket maximums, as well as treatments and expenses like travel that were not covered, Sam blew through savings and ended up putting many expenses on a credit card.
"I didn't have nearly enough saved up to cover all of it, and to this day I'm still paying off credit cards," Sam says.
It also put a damper on any home-buying plans. "It was something I was considering in the future after building that fund up a bit more," Sam says. Now, nearly three years later, Sam estimates it will take another three to four years to replenish the savings earmarked for a home.
"Even then, I have this pervasive anxiety that something bad can happen that will wipe me out again, so I'm not sure I even want to buy."
Sam is not alone in struggling to balance health-care costs with savings. Medical-related expenses have become so burdensome that there are a quarter of a million medical campaigns listed on GoFundMe each year, raising about $650 million to help families manage these costs. Even more troubling, health-care expenses are one of the leading causes of personal bankruptcies in the U.S.
Even when the situation is not so dire, these bills can have an impact. Over half, 52% of U.S. adults say health-care expenses have prevented or delayed their day-to-day activities, while about a quarter say medical bills have impacted longer-term goals like retirement, according to a recent survey from health savings account platform provider Lively.
"Health care is ridiculously expensive right now," Jonathan Wiik, principal of health-care strategy at TransUnion Healthcare, tells CNBC Make It. "Being admitted to the hospital is like buying a house," he says, adding that an emergency room visit is somewhere in the neighborhood of $5,000, while the bill for being admitted to the hospital quickly approaches "six figures" if you're there for any normal amount of time, about 4.5 days on average.
When it comes to health care, the average American household spent almost $5,000 per person last year in out-of-pocket expenses and insurance premiums. That's a 101% increase from the roughly $2,500 per person that Americans spent about 34 years ago in 1984, according to an analysis of the Bureau of Labor Statistics Consumer Expenditures Survey by data company Clever.
You may think these rising medical expenses are a heavy burden for older Americans, many of whom have complex health needs. And that's true.
Yet those under 35, millennials and Gen Z, are also being knocked off course by health expenses as well. And for them, it can affect their ability to achieve major life milestones, such as buying a home, starting a family or saving for retirement, Lively's survey finds.
That's because, in many cases, they have not started to accumulate significant wealth levels that can offset these major expenses, and they may have the added burden of student loan and credit card debt to balance.
In fact, a recent report from the nonprofit, nonpartisan think tank New America predicts that millennials, in particular, will not replicate the financial success of their parents or grandparents. The average millennial today (ages 23 to 38) has 41% less wealth than those who were at a similar age in 1989, according to"The Emerging Millennial Wealth Gap" report.
And while student loans play a much-publicized role in the millennial wealth gap, rising health-care costs are part of the equation as well. "There's an overriding sense of economic insecurity and vulnerability that appears to be impacting life choices," the study's author Reid Cramer tells CNBC Make It.
In many ways, it comes back to stagnant incomes, Cramer says. Millennials currently earn 20% less than Baby Boomers did at the same stage of life, despite being better educated, the report finds. And if health-care costs are eating into that stagnant — and at times unreliable — paycheck, that will have an impact.
"There's just less [money] available to do everything else with, including build wealth and save," Cramer says. It's perhaps not surprising that we're seeing this economic insecurity delay future planning and over time, could lead to poor wealth outcomes overall.
"If the diverse cohort of young adults who constitute the millennial generation can't improve their financial balance sheets by earning more, increasing their assets and lowering their liabilities, their climb up the economic ladder won't be delayed— it won't occur at all," Cramer concludes.
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