By Andrea S. Christopher, MD, MPH, David U. Himmelstein, MD, Steffie Woolhandler, MD, MPH, and Danny McCormick, MD, MPH
American Journal of Public Health, January 18, 2018 (online ahead of print)
Objectives. To assess the effect of households’ outlays for medical expenditures on income inequality and changes since the implementation of the Affordable Care Act (ACA).
Methods. We analyzed data from the US Current Population Surveys for calendar years 2010 through 2014. We calculated the Gini index of income inequality before and after subtracting households’ medical outlays (including insurance premiums and out-of- pocket costs) from income, the financial burden of medical outlays for each income decile, and the number of individuals pushed below poverty by medical outlays.
Results. In 2014, the Gini index was 47.84, which rose to 49.21 after medical outlays were subtracted, indicating that medical outlays effectively redistributed about 1.37% of total income from poorer to richer individuals, a slightly smaller redistribution compared with the years before the ACA. Medical outlays reduced the median income of the poorest decile by 47.6% versus 2.7% for the wealthiest decile and pushed 7.013 million individuals into poverty.
Conclusions. The way we finance medical care exacerbates income inequality and impoverishes millions of Americans. This regressive financing pattern improved minimally in the wake of the ACA.
From the Results
In 2013, medical outlays lowered the median income (calculated after subtracting medical expenditures) for the poorest decile by 49.2% and by 10.7% for the next poorest group versus 2.5% for the wealthiest decile, a markedly regressive pat- tern. This unequal pattern improved only slightly in 2014. In that year, medical outlays lowered median income in the lowest income decile by 47.6% versus 2.7% in the top decile. For those in the top 1.0% of income, medical outlays decreased income by only 1.3%.
In 2014, 9.28 million Americans whose incomes before their medical outlays were above poverty were pushed into near poverty (150% of FPL) when medical outlays were subtracted from their family incomes. Similarly, 7.013 million were lowered into poverty (below 100% of the FPL), and for 3.946 million, medical outlays reduced their incomes into the extreme poverty range (below 50% of the FPL). These numbers were little changed from 2013 (before the main provisions of the ACA took effect), when medical outlays pushed 7.263 million people below the poverty line, 3.809 million into extreme poverty, and 9.576 million below the near-poverty threshold.
From the Discussion
In the United States, most insured families pay premiums, deductibles, and copayments that are not scaled to income. As a result, medical care expenses exacerbate poverty and income inequality, which are key social determinants of health. Although access to high-quality care might narrow the health disparities caused by social inequality, the ways we pay for care—notably, the failure of most insurance programs to scale premiums and deductibles to income—may widen them.
Out-of-pocket health care expenditures are likely to continue increasing under the ACA, as well as under Republicans’ proposed alternatives. The proportion of privately insured employees whose individual coverage carries an annual deductible of $2000 or more has increased 6-fold since 2006. Most of the new private coverage offered on the ACA exchanges carries high deductibles. These could drive many families into poverty despite cost-sharing subsidies that reduce copayments and deductibles for those with incomes below 250% of the FPL.
Equally worrisome, Centers for Medicare & Medicaid Services has allowed several states to impose cost sharing on Medicaid recipients, reversing a long-standing rule against such policies.
In some nations the wealthy pay a larger share of their incomes toward health care than do the poor. In others, health expenditures account for a similar share of incomes for the poor and rich. In the United States, health expenses exact a higher toll from the poor, whereas the wealthy pay relatively little. This regressive financing pattern—which redistributes as much as 1.7% of total income from poorer to richer Americans—lies largely hidden in a complex web of private and public insurance arrangements. We suspect that the opacity of US funding streams helps shield the wealthy from demands for a fairer health-financing pattern.
By Don McCanne, M.D.
The way we pay for health care in the United States is egregiously regressive. In spite of ACA, “medical outlays reduced the median income of the poorest decile by 47.6% versus 2.7% for the wealthiest decile and pushed 7.013 million individuals into poverty.”
Income inequality has reached intolerable levels in the United States bringing ever more riches to the wealthy (how much wine and cheese do they need?) while leaving workers with relatively stagnant wages and leaving the poor without much hope for ever moving up to at least a minimally acceptable standard of living. This astonishing study shows that medical expenditures have worsened this inequity and have shoved another 7 million people into poverty (4 million into extreme poverty!). What a penalty to pay for having the misfortune of needing health care.
Considering the recent tax bill signed into law by President Trump, the nation is moving in the wrong direction in addressing the problem of income inequality. We need new policies, and one of the easiest and most beneficial would be to enact a well designed single payer national health program, funded equitably through the tax system. That way we would ensure that everyone would have health care while shifting from a regressive to a progressive pattern of financing. It would be good for our health and good for our personal finances.
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