Key takeaways:
Healthcare literacy is the ability to understand medical information to make informed decisions. Healthcare cost literacy addresses how someone processes financial information associated with medical expenses.
Healthcare cost literacy can help you make decisions. This includes knowledge about health insurance coverage, healthcare access, and affordability planning.
There is free help available if you need to learn more about healthcare costs. This information can help you make advantageous financial choices about medical care.
The healthcare system can be confusing and overwhelming. This makes decision-making difficult for individuals. Health literacy can increase your understanding of the many aspects of medical care.
Even people adept at navigating the medical system struggle to reduce out-of-pocket costs. Fluency in this area has become known as healthcare cost literacy (HCL).
Healthcare cost literacy is a new concept. As an evaluation tool, HCL assesses knowledge of issues such as medical expenses and insurance coverage. Healthcare cost literacy is also essential as a mindset. HCL can help you avoid financial toxicity — economic stress that affects your health — and reduce medical debt.
Overspending on healthcare happens to people and nations. In 2022, prescription prices were about 3 times more in the U.S. than in other high-income countries. And GoodRx Research found that about one-third of people in the U.S. don’t fill prescriptions because of cost. This can risk their health and lead to higher medical expenses in the future.
Healthcare cost literacy can empower people to understand how to save on prescriptions, which could help them with medication adherence. HCL also would help consumers use their health insurance to reduce their out-of-pocket costs.
HCL could influence the health plan you choose. It can also compel you to monitor your use of medical care to help lower costs. One example is limiting appointments to in-network healthcare professionals. Medicare enrollees could benefit from HCL when comparing Part D prescription plans.
Help with medication costs: Ways to afford your prescriptions include switching to generic options, using manufacturer savings programs, using GoodRx coupons, and filling larger quantities at one time.
Medicare prescription payment plan: Beginning in 2025, original Medicare and Medicare Advantage enrollees can sign up to make payments for Part D out-of-pocket costs. This means being billed instead of paying the pharmacy up front.
Medication help from patient assistance programs: You may be able to get some or all of the cost of your medications covered by patient assistance programs run by nonprofits, government agencies, and pharmaceutical companies.
HCL may be most important for people who don’t have health insurance or are underinsured. Having HCL can help you maximize free and low-cost healthcare options.
There are many resources available to help you understand healthcare costs. They include:
State Health Insurance Assistance Program (SHIP) for people enrolled in Medicare
Your health plan’s summary of benefits and coverage and formulary (list of covered medications)
Hospital price transparency — price estimation tools to help you calculate hospital costs in advance (hospitals are required to publish standard charges for services that can be scheduled)
Health plan price transparency, which offers online cost-sharing estimates for hundreds of shoppable services (health insurance plans are required to publish price information on certain covered treatments, services, and medications on their websites)
Healthcare cost literacy means you can assess your medical care, insurance, and expected expenses. To do this, you need to know about cost-lowering strategies.
With HCL, you can strategically schedule needed-but-not-urgent procedures. For instance, let’s say you don’t usually meet your health plan deductible. When you have a year when you do, this could be the right time for covered surgery that you’ve delayed. Since you’ve met your deductible, the procedure likely has lower out-of-pocket costs. And it might be covered 100% by your plan.
HCL could help when you receive a referral for imaging services, such as an MRI. A primary care provider may send you to one of their office’s affiliated imaging centers. If you have the scan without using HCL, that could be a costly mistake. This is because the imaging center may not be in network for your insurance. It also might not have the best price if you’re paying cash.
Some quick research can point you to imaging centers covered by your insurance. This could save you from paying more out of pocket. (An MRI in the U.S. costs more than $1,300 on average.) Your insurance may cover the scan at a reduced amount if the provider is out of network.
The key to HCL is awareness of your options. That means taking responsibility for understanding how the healthcare system works. Reading GoodRx content is a good start. Have a strategy for scoring the lowest prices possible. Asking questions about costs up front and negotiating medical bills can boost your HCL.
Additional steps that can help you improve your HCL include:
Understanding basic health insurance terms, such as premium, deductible, and copay
Understanding how to price shop, especially if you’re a cash-pay healthcare consumer
If you have insurance, understanding prior authorization for medical care and medications
Understanding how to resolve errors and issues by scrutinizing medical bills
Understanding how to access resources to reduce your costs, such as financial assistance programs from hospitals and other healthcare providers, patient assistant programs, and manufacturer savings programs
Reducing medical expenses may be easier than you think if you boost your healthcare cost literacy (HCL). This concept describes how well individuals understand financial issues related to medical care. Topics include procedure costs, prescription prices, and health insurance coverage. To increase your HCL, learn how the healthcare system works. Then you can take action to reduce your out-of-pocket medical costs.
Center for Health Care Strategies. (2024). What is health literacy?
Centers for Medicare & Medicaid Services. (2024). Consumers: How to get the most out of hospital price transparency.
Centers for Medicare & Medicaid Services. (2024). Consumers: How to get the most out of transparency in coverage.
Centers for Medicare & Medicaid Services. (2024). Use of pricing information published under the transparency in coverage final rule.
Guttentag, A., et al. (2023). Healthcare cost literacy: Exploration of concept and initial development of a novel tool in a representative U.S. adult population. medRxiv.
Guttentag, A., et al. (2023). Healthcare cost literacy in the United States: Estimates from a representative national sample. AcademyHealth Annual Research Meeting.
Mulcahy, A. W., et al. (2024). International prescription drug price comparisons: Estimates using 2022 data. U.S. Department of Health and Human Services.
Research prescriptions and over-the-counter medications from A to Z, compare drug prices, and start saving.