When Inflation Rises, Health Outcomes Fall

As inflation hit a 40-year high over the summer, Americans faced tough decisions on how to tighten budgets — and unfortunately, many cut medical care at the expense of their health. A June 2022 survey conducted by West Health and Gallup found that in the prior six months, high health care prices drove 38% of American adults — nearly 100 million people — to delay or skip treatment and cut back on driving, utilities, and food or borrow money to pay medical bills.

For the 37 million American adults living with diabetes, the 116 million managing hypertension, and the countless others living with different chronic conditions, skipping appointments or prescriptions can be life threatening. While there are a number of factors that influence inflation’s impact on health behavior, it’s essential for employers to recognize its effect on employees and find ways to help them afford and access the care they need as prices continue to go up.

Health behaviors are driven by finances

Do people see health care as a luxury that can be cut when money is tight? What about nutrition and fitness, which play a major role in health outcomes? Health care and health behaviors factor into peoples’ lives in different ways, but it’s clear that financial stress and emotional states have a direct impact on people’s health.

Ultimately, how people set their health priorities is influenced by their ability to pay for medications, doctor visits, gym memberships, and even healthy food. Rising costs for normal day-to-day necessities like transportation and housing mean that for many, there isn’t as much money left over to take care of their health. And if people take second (or third) jobs to supplement their income, the extra working hours inevitably cut into time they could be spending on their health and can increase their stress levels. In fact, according to the American Psychological Association’s annual Stress in America survey, 87% of Americans say that the rising prices caused by inflation are a significant source of stress.

When basic needs are threatened and an individual’s fight-or-flight response is triggered by economic strain, it’s important to think about the behavioral impacts. If a person is constantly feeling stressed about finances and struggling to pay for necessities, they’re likely to have less energy to focus on making healthy lifestyle choices or accessing preventive medicine, thus creating a domino effect on other important aspects of their lives.

The costs of rising health care prices

According to a study from the Integrated Benefits Institute, “for every dollar of the almost $950 billion spent on health care benefits, another $0.61 of productivity is lost to illness and injury.” For the sake of company finances, productivity, and employee well-being, employers need to consistently support their employees’ best health.

In February 2021 the National Bureau of Economic Research examined how a $10 price increase on prescription drugs would impact health outcomes. They discovered drug price increases are truly a matter of life and death. The $10 increase resulted in a sharp 33% increase in deaths as patients cut back on costly medications for heart disease, hypertension, asthma, and diabetes.

This research suggests that inflation may have a major influence on mortality rates. During inflation, the costs of prescription drugs often fluctuate wildly, suddenly increasing by hundreds or thousands of percentage points. As people struggle to afford their medications during inflation, it’s clear that some may die as a result of unforeseen price increases.

How employers can help

In the face of record inflation, employers must encourage employees to take an active role in their health behavior and remind them about resources they may already have available.

Evidence shows that employees tend to forget about — or be completely unaware of — their complete benefits packages, including $0-copay preventive care like wellness visits and flu shots. Back in 2012, a Health Affairs survey of people in California with consumer-directed health plans “found that fewer than one in five understood that their plan exempted preventive office visits, medical tests, and screenings from their deductible.”

This issue has persisted throughout the last decade. According to a 2019 survey by Maestro Health, 35% of employees “either only somewhat understand, don’t understand, or know nothing about their health care coverage” — while 62% “feel their employer does not serve as a resource for their health care-related questions.” We owe it to employees to do our best and work with our partners to make benefits easier to understand and access.

Unfortunately, inflation may raise costs not only in the near term but also in the long term, so preparation is key. Small changes in behavioral health can have positive downstream economic effects. This is particularly important for the many people with chronic conditions who incur especially high medical costs — such as those with diabetes, who incur an annual average of $16,750 in medical costs.

Proactively implementing health care solutions with meaningful ROI can help, and this includes virtual care. Virtual-care providers offer programs to help manage a variety of conditions, including diabetes, hypertension, musculoskeletal issues, mental health, and more. The ROI of virtual care for employers can range from fewer employee sick days and a healthier company culture all the way to clear medical cost savings. Programs like these may also lead to greater employee retention, as Pew Research found that 43% of workers left their jobs due to a lack of good benefits.
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With inflation rates still tracking high, the hard health care choices Americans must make may just be beginning. In the face of crises like this, employers need to fold these realities into their strategic planning and be proactive about the implications of care avoidance to help employees best mitigate the challenges ahead.

Copyright 2022 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.