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Like most people, you've come to count on doctors and hospitals to keep you well, from colds to cancer to diabetes. Over the last few years, you may have found your cost of care has gone up. When your insurer says your premiums cover the cost of care, what does that mean? Where does your money go?
Direct Health Care Costs (90¢) – For each dollar you spend on health insurance premiums, about 90% – or 90¢ – goes directly to pay for your care.
Hospitals (39¢) – Even if you never get sick enough to go to one, around 39¢ of your premium dollar goes to hospitals. This is because your premiums get pooled with other members' premiums. Insurers, like Blue Cross and Blue Shield of Texas, use this money to pay claims. If hospitals charge your insurer more, it takes more of your dollars to cover those charges.
This money is used by hospitals to:
Doctors (22¢) – The next biggest chunk of your premium goes to pay doctors and other health care providers. Keep in mind, a specialist costs more than a family doctor. And, doctors in a larger city may cost more than those in smaller and rural areas.
This money is used by doctors to:
Drug Costs (21¢) – U.S. drug spending is rising by 7.3% yearly. Many new drugs are coming on the market. Some that treat serious illnesses have big price tags2. And, more people are insured now. They can get care and drugs that they may have gone without when they were uninsured. So more people are spending more on drugs.
What goes into the cost of drugs?
Other Health Care Services (8¢) – From finger splints to wheel chairs, these costs come out of your premium, too.
This piece of the dollar also covers:
Other Costs (10¢) – With 90¢ dedicated to the cost of care, that leaves just a dime out of every dollar for the insurers' cost of providing coverage.
This money is used to:
The remaining 2 or 3¢ is the insurers' profit margin.
Many health care costs are related to personal behavior. Unhealthy habits can result in chronic health issues, which cost our economy an estimated $1 trillion each year. Here are just a few ways you can improve your health while helping to manage your health care costs. Many long-term illnesses can be prevented or managed when found early. Most health insurance plans cover a range of preventive services like screenings, immunizations, and other types of care. Be sure to take advantage of these benefits.
Health care fraud is a key driver of rising health care costs. About 3% of all health care spending — or $68 billion each year — is lost to health care fraud. Here are some things you can do to help prevent health care fraud and abuse.
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