A widely reported study of the Milliman Medical Index estimates that the typical family of four covered by employer-provided health insurance in a preferred provider organization (PPO) will spend almost $25,000 for health coverage and services in 2015.  That includes premiums paid by employer and employee, as well as all the out of pocket costs.  For middle income families, health costs are nearly half of income (the median household income in 2012 was $51,000).

There are many deviations from a “typical family of four.”  A growing segment of Americans are retirees without children in the home and there are many Americans who live alone or as a couple.  Their access to healthcare is provided through different channels and the costs they experience will be quite different from “typical.”  There are also lifestyles and medical choices that can affect health costs radically, regardless of living arrangement.

One of the largest cost drivers for Americans is unhealthy behaviors including: the lack of proper diet and aerobic exercise; not using seat-belts and sunscreen; the use of recreational drugs, tobacco and excessive alcohol; lack of protective gear for bicycles and motorcycles; and engaging in more risky activities, such as mountain climbing, sky-diving and extreme sports, to name a few.  Each of these can add to health costs those individuals will incur.  The American Medical Association estimated that about 25% of health costs are attributable to these behaviors.  In fact, unhealthy behaviors in the American workforce costs $623 per worker.  Improper diet and exercise are showing up as a spike in obesity, heart disease and diabetes.  About 50% of Americans have a chronic disease.

Many Americans resent being stuck with the healthcare tab for others’ unhealthy behaviors.  For example, 4 out of 5 overall Americans believe that people with healthy behaviors should receive a discount on insurance premiums.  Most people also believe that smokers should pay more for health insurance than non-smokers.  But only 31% feel that obese people should pay more for health insurance.  Of course, some argue that bad behaviors are often the expression of a poor hand dealt by genetics or culture or economics, and that to punish anyone for misbehavior would be unjust.  The core of this argument is frequently used to excuse criminality.

Among the elderly, healthcare spending is concentrated into the last year of life.  About one-third of terminally ill patients have used up their insurance and savings to cover uninsured medical expenses such as home care. In 2013, Medicare spent $492 billion of which an estimated 28% ($138 billion) was for medical care in the last year of life. Medicaid ($438 billion in 2013) also covers some people during the last year.

The last year issue is not well understood by all patients. Some assume that for cultural reasons they should want the most aggressive medical treatment available to extend life. Others would prefer palliative treatment that allows them to live calmly and in relative comfort. Unfortunately, few patients receive the appropriate counsel on what their options are and too few execute a living will that can guide medical staff toward aggressive care or to avoid aggressive measures to sustain life. When guidance is absent, medical staff will routinely provide aggressive (and very expensive) care. The patient’s informed choice will have a huge impact on costs incurred during the end of life. A living will should be mandatory for those admitted to hospitals and skilled nursing facilities.

Elective procedures comprise a small part of healthcare spending in the US. For example, during 2011, just $11 billion was spent for face lifts, Botox  treatments and breast augmentations.  There are many other elective procedures and locations outside the US specialize in medical tourism to accommodate patients looking for low cost care.

Millennials want to know healthcare prices in advance and to be able to comparison shop for the best deal.  Many other patients have been covered by employer or government plans – obviating the need to inquire about cost.  Patients should be asking what a proposed procedure will cost and if there is another procedure that might be just as effective at a lower cost.  Those inquiries may condition physicians to a deeper awareness of costs in their treatment planning.

The annual healthcare spending in the US has hit $3.8 trillion.  With a quarter of that attributable to unhealthy behaviors, consumers can save up to $950 billion by engaging in more healthy behaviors.  Seniors in the last year of life could save some part of $138 billion by making a more informed choice and having it recorded in their living will.  All consumers could adopt the millennial’s approach to asking about procedure costs and shopping for the best provider and cost profile.  In total, more than one-trillion in savings per year can be under consumers’ control.