31% of Millennials, and 25% of Americans Overall, Avoid Medical Treatment Due to Financial Burden

According to a new survey, conducted on a sample of 1,000 individuals, one-quarter of Americans have avoided seeking out healthcare services because they were afraid of the potential financial risks—they couldn’t afford bad news, nor treatment.

The survey also showed that the millennial generation was the least likely demographic group to seek medical attention (for cost reasons).

In fact, nearly one-third (31%) of millennials avoided seeking out treatment entirely, due to high costs.

For reference, 25% of Gen-Xers, 23% of Baby Boomers, and only 8% of the Silent Generation behaved the same way.

Unfortunately, this just part of a much larger pattern of millennials struggling economically. For example, one in three millennials still live at home.

Perhaps more surprising than this was the fact that 87% of those surveyed had health insurance, meaning that insurance coverage alone was not enough to assuage fretful minds.

But concerns over insurance did contribute. Over half of all respondents (56%) said they were concerned with the future of their health insurance.

Non-Linearity, Loss-Avoidance, & Soaring Healthcare Costs

However, it’s not just about insurance—even people who have insurance are worried about the financial risk of medical care.

And they’re right to.

Why?

Because healthcare costs are non-linear, they’re exponential—someone who requires ten times as much treatment won’t pay ten times as much, they’ll pay fifty, or one-hundred times as much.

This means that if you get bad news, it’s really bad—and really expensive.

For example, in 2016 US spending on healthcare topped out at an average of over $10,000 per person (double that of most other developed countries) but fully half of that can be attributed to the 5% most ill or hurt (or otherwise in need of treatment).

Likewise, nearly half of Americans either didn’t spend anything on healthcare, or spent a nominal amount.

This makes sense when you think about it: one person’s cancer treatment is hundreds of times more expensive than a dose of antibiotics.

This non-linearity is why so many people are concerned about going to the doctors. And frankly, it’s one of the main reasons US healthcare costs are so high.

Let’s look at a hypothetical example: say Jim gets sick with a bacterial infection. It’s not super serious, but Jim goes to the doctor anyways. He gets a prescription for antibiotics, and is cured.

Pretend, for ease of calculation, that this course of treatment costs $100 in total.

Now let’s say Jim doesn’t go to the doctor. In this case, let’s say there’s a 90% chance that he’ll get better on his own, and a 10% chance his infection will complicate, and he’ll need significantly more treatment.

Most people in Jim’s situation will take the risk due to loss-aversion heuristics, which are thinking shortcuts hardwired into our DNA—people will risk something big, if they had a good chance at losing nothing, rather than take a guaranteed small hit (even if the small hit is rational on a specified time-horizon).

Jim risks it, and he’s fine.

This may not be a problem on an individual level (it’s your choice after all), but individual gambles add up.

Pretend in the first example that ten people got sick and paid $100 for antibiotics. In total, this costs $1,000.

In the second example, ten people get sick: five of them get better on their own (and pay nothing), four of them end up going on antibiotics eventually (paying $100), and one of them suffers from complications—he now has pneumonia too.

The last person is where the cost non-linearity kicks in: they end up staying in the hospital and taking an expensive drug cocktail. This ends up costing $1,600.

The healthcare costs in our second example end up costing a total of $2,000 ($400 for standard antibiotics, and $1,600 for our friend with complications)—twice as much as the first option.

Human psychology and irrationality is primarily why the US spends twice as much on healthcare as do other developed countries, for roughly equivalent quality.

At the end of the day, we can reform our system as much as we like, but until we come to terms with our own limitations, and account for non-linearities, it won’t improve.