How to manage increasing medical costs: Practical tips and strategies

Medical costs are increasing at a staggering pace, making it essential for individuals and families to find ways to manage these expenses effectively. According to The Simple Sum, Malaysia experienced a medical inflation rate of 16.2% last year, significantly higher than the global average and second only to India in the Asia-Pacific region. This trend is alarming as it can quickly deplete savings and impact financial stability, especially for those with prolonged illnesses.

Several factors contribute to the rising medical costs:

Medical Inflation: Medical inflation refers to the increase in healthcare service costs, including medicines, diagnostic tests, and hospitalisation charges. In India, medical inflation rose by 14% in 2021, surpassing China's rate.

Technological Advancements: New medical technologies and treatments often come with high price tags, contributing to overall cost increases.

Chronic Diseases: The prevalence of chronic conditions such as diabetes and hypertension has surged, leading to higher healthcare costs.

Prescription Drug Prices: The launch prices of new drugs have seen exponential increases, with nearly half of new drugs in 2020-2021 costing over $150,000 annually.

Strategies to Manage Rising Medical Costs

While the rising trend in medical costs is concerning, there are several strategies you can adopt to mitigate its impact:

1. Secure Comprehensive Health Insurance

Health insurance is a critical tool in managing medical expenses. It helps cover hospitalisation costs, surgery, medication, and outpatient treatments. For instance, policies covering critical illnesses like cancer or heart attacks can provide lump-sum payouts to cover medical and living costs during recovery. When choosing a policy, compare different plans to find one that offers the best value for money and suits your needs.

2. Increase Your Savings

Insurance may not cover all medical expenses, such as vitamins, supplements, and minor illnesses that don't require hospitalisation. Therefore, it's essential to set aside additional savings to cover these costs. Building a robust emergency fund can provide a financial cushion in times of medical emergencies.

3. Lead a Healthier Lifestyle

Adopting healthier lifestyle habits can significantly reduce the likelihood of falling ill and needing medical attention. Simple changes like eating a balanced diet, exercising regularly, and getting adequate sleep can strengthen your immunity and overall health. Research has shown that sedentary lifestyles contribute to non-communicable diseases, which are costly to treat.

4. Opt for Higher Deductibles

Choosing health insurance plans with higher deductibles can lower your premium costs. This approach works well if you have a healthy lifestyle and don't anticipate frequent medical visits. However, ensure you have sufficient savings to cover the deductible if needed.

5. Explore Value-Based Plan Designs

Employers can manage rising medical benefit costs by adopting value-based plan designs. These plans give employers more control over costs while encouraging employees to make healthier choices. Flexible benefit plans and wellness programs can also help reduce overall healthcare expenses.

While rising medical costs are a significant concern, proactive financial planning and lifestyle changes can help mitigate their impact. By securing adequate health insurance, saving more, and leading a healthier lifestyle, you can better manage the financial burden of healthcare expenses.