Imagine the stress and anxiety that would come from being diagnosed with an invasive form of breast cancer. Now imagine that you're getting hit with medical costs at the same time.

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The costs are coming in so quickly that you have to keep a spreadsheet just to keep track of them all. Before you know it, the sum total at the bottom of the spreadsheet is in the tens of thousands of dollars.

This was the experience of Luan Lawrenson-Woods: a breast cancer survivor who now advocates on behalf of patients. The most alarming part of her story is that Luan isn't from New York, New Jersey or New Hampshire. She's from New South Wales.

Australians are rightly proud of our universal healthcare system. Australians look at countries like the United States - where 65 per cent of people who file bankruptcy blame medical bills as the primary cause - with astonishment: astonishment that a whole country of people would be comfortable with that as a policy outcome.

Australia is far from being like America. But stories like Luan's highlight that we are just as far from being a panacea when it comes to universal healthcare.

Moving from anecdote to data, the problems with out-of-pocket costs are plain to see.

Australians paid a whopping $1.3 billion of out-of-pocket costs in 2024. This will rise to $1.7 billion each year by 2030 if this trend continues.

Residents of the ACT have it the worst. Average out-of-pocket costs in the ACT are almost double the nationwide average. It's so bad that we now see Canberrans travelling to Adelaide for treatment in what's called "medical tourism".

Someone getting a hip replacement could pay up to $200 for their initial out-of-hospital consults. They could pay up to $1600 for the procedure in hospital, another $300 for an anaesthetist and another $300 for accommodation, plus up to $200 for out-of-hospital follow-ups.

"I'm not an outlier" warned Luan. "In the breast cancer community some women are $50,000 out-of-pocket. Women are going into debt: taking out loans."

This is, again, clear in the data.

Almost one million Australians delayed or avoided seeing a specialist in 2024 because of these costs. This will rise to 1.2 million by 2030.

Young people are the most likely to do this. An additional 10,000 young people will avoid specialist care because of rising costs by 2030.

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Worse still, more than $1 billion was withdrawn from superannuation in 2024 to pay for medical costs.

The problem of rising health costs is now so large that it is driving Australia's inflation data.

There's been a big debate about who is to blame for the cost-of-living crisis since the Reserve Bank increased interest rates a fortnight ago.

The government blames the private sector. The opposition blames government spending. Business groups blame excessive regulation (and government spending). Unions and civil society blame growing inequality.

The monthly press release from the Australian Bureau of Statistics doesn't help much. One month it's housing, the next month it's food, the next month it's transport, the next month it's recreation costs, the next month it's health costs.

But if we take a long view, if we get out of the month-to-month, and if we ignore the politics, the picture is much clearer.

If we look at the major structural drivers of inflation over the last 10 years and ignore things that are driven by taxation (i.e. alcohol and cigarettes), the drivers of our cost-of-living crisis are unambiguous: it's healthcare costs, it's housing costs, and it's education costs.

It doesn't matter if the time horizon is five years, 10 years, 15 years, or 20 years, these three things are the core drivers of our cost-of-living woes.

What's interesting about this list is the order. There has been a substantial and long-running focus on housing costs in both the media and in politics.

What's striking is that healthcare costs have been rising almost twice as fast as housing costs over the last 10 years. And yet, it feels like there's been relatively little focus on health.

What can we do about rising health costs?

The health system is a complex hybrid of public and private actors that faces skills shortages and difficult trade-offs when it comes to policy changes.

The lowest-hanging fruit, however, is to improve transparency; to at least make it easier for consumers to shop around and make sure they are getting the best bang for buck.

More than 50 per cent of consumers were not aware of fees before a specialist appointment. The same proportion of people received bills that were unexpected. Almost 30 per cent have received administrative and booking fees which are almost always illegal.

The government's announced review into the Medical Cost Finder website is a welcome development. Making it an opt-out system will get more data into the system for consumers to use. Adding patient reviews and quality metrics will make it more insightful for consumers.

We made one big mistake when it came to the cost-of-living crisis: we assumed it was cyclical. We assumed it would go away with higher interest rates when, in reality, it is structural; rooted deeply within the most essential things we buy and for which we have the most inelastic demand.

If the government is looking for practical, meaningful ways to reduce cost-of-living pressures, reducing structural costs in healthcare is the place to start.

Adam Triggs is a partner at economics advisory firm Mandala, a visiting fellow at the ANU Crawford School and a non-resident fellow at the Brookings Institution.

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