If anyone in your household develops one or more medical conditions, know that this can derail your family's long-term financial plans, starting with the cash deficit it creates. Depending on the severity of the health issue, it can also lead to the rapid depletion of savings, assets, and even retirement funds.
Understanding the impact of illness on finances is now even more crucial, as health emergencies have become highly prevalent. A National Committee for Quality Assurance (NCQA) report, for instance, shows that one in every five U.S. adults uses emergency departments for health care each year.
With a better understanding of medical conditions, you can make more informed decisions regarding smarter planning for healthcare and finances.
What Are Medical Conditions?
The term "medical conditions" refers to specific concerns impacting one's health. Medical and healthcare professionals identify and diagnose them based on:
- Signs and symptoms
- Medical and laboratory testing
- Findings of physical examinations
Medical conditions can range from acute (short-term and temporary) to chronic (long-term conditions that last for months or even a year or so). They can also be physical, mental, cognitive, or genetic in nature.
The U.S. Centers for Disease Control and Prevention (CDC) says that three in four U.S. adults live with at least one chronic condition. More than half have two or more.
What Are the Most Common Medical Conditions?
Highly prevalent medical conditions in the U.S. and worldwide are often those categorized as "chronic."
Per the online hub Peterson-KFF Health System Tracker, as of 2022, the most common chronic disease in the U.S. is obesity, affecting 42% of U.S. adults (versus the 17.8% average of comparable countries). Other examples include:
- Hypertension (high blood pressure): 31.6% of U.S. adults vs. 28.6% comparable country average (2019)
- Diabetes: 12.5% of U.S. adults vs. 6.1% comparable country average (2022)
- Asthma: 11% of U.S. adults vs. 6.6% comparable country average (2021)
- Chronic kidney disease: 8.2% of U.S. adults vs. 6.6% comparable country average (2021)
- Depressive disorders: 6% of U.S. adults vs. 4.7% comparable country average (2021)
How Can Medical Conditions Quickly Change a Family's Long-Term Financial Plans?
Without adequate family financial planning, managing health expenses, particularly those for emergencies and chronic conditions, can become extremely challenging. Strained pockets and bank accounts can result in devastating consequences that can affect your finances now and in the future.
Creating an Instant Financial Deficit
Medical conditions can lead to instant financial deficit due to sky-high, out-of-pocket medical costs for families without adequate financial security strategies.
An example is having little to no health insurance coverage. In this case, families will likely pay for:
- Pricey emergency care costs
- Costly deductibles
- Non-covered services (e.g., medications and diagnostic tests)
- Out-of-network charges
Another way medical conditions can change a family's long-term financial plans is by causing a potential loss of income. Illnesses or injuries can lead to days away from work or even job loss.
Rapid Depletion of Savings and Assets
When you or another member of your household develops chronic medical conditions, your savings and assets could rapidly disappear due to mounting long-term costs for:
- Specialized medications
- Ongoing treatments and therapies
- Increased frequency of doctor visits
- In-home care or specialized facility services
- "Hidden" costs, such as travel expenses to doctors and specialists, mobility aids, non-prescription supplies, specialized diets, and home modifications
All those expenditures can leave a huge, ever-growing dent on your household's finances, unless you get financial support, such as Social Security Disability Benefits.
There are, however, many requirements for SSD (as with other government assistance programs). An example is providing evidence of a medical condition that impedes your ability to work for at least one year, according to this lawyer for Social Security Disability benefit claims.
Preparing for SSD claims and other government aid is, therefore, critical to preserving your household's finances in cases of medical conditions. Without this support, your savings and assets could quickly become depleted.
Forced Usage of Retirement Funds
The Center for Economic and Policy Research says that in 2024, health premiums and out-of-pocket costs caused typical working households to spend nearly $4,000 on healthcare alone. Ten percent of working families with the highest costs even paid over $14,800 in out-of-pocket healthcare costs.
Since many medical conditions are chronic, meaning they last for at least one year, they can significantly alter your family's long-term financial plans, affecting even your retirement funds. If your savings and assets aren't enough, you may have to tap your retirement funds early.
Frequently Asked Questions
Are Medical Conditions Preventable?
Not all medical conditions are preventable (e.g., genetic disorders like Down Syndrome or Sickle Cell Disease). You can, however, prevent many other health problems or, at the very least, reduce your risks of developing them.
Problems with modifiable risk factors are perfect examples, such as:
- Obesity
- Heart disease
- Hypertension
They share similar modifiable risk factors, such as:
- Unhealthy diets
- Physical inactivity
- Excessive alcohol consumption
- Smoking
Since those risk factors are modifiable, changing or avoiding them can help you minimize the odds of developing diseases associated with them.
What Can Families Do to Stay Financially Healthy in Times of Medical Crises?
You should start a "crisis budget" as early as you can (even more so if anyone in your family has an increased susceptibility to medical conditions), so you can build an emergency medical fund.
Your budget's focus should be to prioritize essential bills and minimize non-essential spending. In doing so, you can free up more cash that you can then put toward your emergency funds.
Regularly review your health insurance policies, too. It can help ensure you're not underinsured or overpaying for coverage you don't need.
A Health Savings Account (HSA) is another smart option. It's a triple-tax-advantaged tool that acts not just as a savings account but can also help pay for qualified medical expenses.
Don't Let Medical Conditions Dramatically Impact Household Finances
From creating instant cash deficits to depleting savings and retirement funds, these are all changes that can occur as a result of medical conditions, particularly chronic illnesses or injuries.
The good news is that you also have several strategies to prepare for these "possibilities." Knowing your government aid options (such as Social Security Disability benefits), building an emergency fund, and having an HSA can help you minimize their impact on household finances.
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