By Dan Mangan
CNBC, July 6, 2016
Health-care inequality is the new income inequality.
The rich in the United States — despite being healthier on average than the poor — have become the biggest buyers of health care, a dramatic shift in spending patterns across income groups, according to a new Harvard study.
The study also reveals that the poor — who as a group have more health needs and live shorter lives than higher income groups — in recent years have become the group with the lowest-spending per capita, after decades of being the biggest spenders.
In other words: People who need health care the most are now getting less of it than the people who need it the least.
The phenomenon came as a result of a reduction in per capita health spending by or on behalf of the poor, at the same time as spending by the rich ramped up significantly, according to the study published in the journal Health Affairs.
“We fear it may presage deepening disparities in health outcomes,” the authors of the study wrote.
One of those authors, Dr. Steffie Woolhandler, said, “A major change happened.”
“Nothing like this has been seen since the full implementation of Medicare and Medicaid,” said Woolhandler, professor in the CUNY School of Public Health at Hunter College, adjunct clinical professor at Albert Einstein College of Medicine and lecturer in medicine at Harvard Medical School.
The study suggests that the downturn in overall health spending by the poorest quintile, or one-fifth of the population, may be at least partly blamed on stagnant wage growth for most workers, coupled with a big increase in the number of health insurance plans with high deductibles. A deductible is the money that health-care consumers must personally pay out of pocket before their insurance covers the cost of medical services or medications.
Research has shown that high-deductible plans can discourage health-care usage, particularly among people with lower incomes.
The study examined health spending for low-, middle- and high-income Americans from 1963 to 2012.
Before 1965, “the lowest income quintile had the lowest [health] expenditures, despite their worse health compared to other income groups,” the report said. But in 1965, legislation was passed creating the federal Medicare program, which provides health coverage primarily to senior citizens, and Medicaid, the joint federal-state program that provides such coverage to the poor.
The two programs, which cover tens of millions of Americans, led to sharply higher spending on health care for lower-income people.
“By 1977, the unadjusted expenditures for the lowest quintile exceeded those for all other income groups” by 23 percent, the report said. “This pattern persisted until 2004.”
Woolhandler said this pattern was one “like we ought to have,” because health spending in different income groups was aligned with the relative health of those income groups.
But after 2004, per capita spending for the poorest quintile fell at a rate of $19.27 annually, or 3.7 percent over an eight-year period until 2012, the study found. At the same time, per capita health spending for members of the richest quintile sharply spiked, rising at a rate of $106.04 annually, or 19.7 percent over eight years.
Health spending by the middle three quintiles also grew, in contrast to what happened to the poor, but at a less dramatic rate — 12.5 percent during the same time period.
By the end of the eight-year period, in 2011, per capita health spending for the poorest quintile, adjusted for age and health status, was $4,074, Woolhandler said. Spending for the middle quintile was $4,647 per capita, she said. But health spending in the richest quintile was $5,817 per capita.
The divergence between income groups was due to changes in health spending among people under the age of 65, according to the study. Its authors noted that “the elderly of all incomes experienced similar, flat expenditure growth,” with the poorest continuing to have the highest spending.
Woolhandler said the data doesn’t reveal whether the poor, as a group, are getting too little in the way of health care, or whether the rich are getting too much as a group. Both scenarios are possible, but “we cannot tell,” she said. However, the shift revealed by the study “cannot possibly be an efficient use of resources” by the health-care system.
“To be efficient, that has to track with need,” Woolhandler said.
While people with worse health status had higher health-related spending, “shifts in health status did not explain the recent divergence in health expenditures among income groups.”
Woolhandler noted that “poor men are living 15 years shorter lives [as a group] than rich men.”
“And for the poorest women, they’re living 10 years shorter than the wealthiest women,” she said.
Woolhandler said that although she and her co-authors cannot prove that slow wage growth and the rise of high-deductible plans played a big role in slowing health spending by the poor, the theory is “highly plausible” given the fact that both occurred at the same time as the divergence in spending occurred.
High deductibles, and cost-sharing features including co-payments and co-insurance, have become increasingly common in insurance plans as employers and insurers try to bend the cost curve of health spending — which has risen faster than overall inflation for decades — by discouraging overuse of medical services.
“People say that co-payments and deductibles have bent the cost curve,” Woolhandler said. “But it’s come at the expense of poor people and middle-income people.”
The passage of the Affordable Care Act, known as Obamacare, has helped the health situation of the poor by allowing states to expand their Medicaid programs to cover more adults. Medicaid, as a rule, does not require premium payments from enrollees, and typically has no or fairly low cost-sharing requirements on enrollees.
But Woolhandler also said the ACA has been “a partial solution” at best, because many of the individual health plans sold on government-run Obamacare exchanges “come with such huge deductibles.” Those deductibles for “silver” plans, the most popular tier of Obamacare coverage, can run around $3,000 per year, while “bronze” plans, which have the lowest premiums, can have deductibles of $6,000.
“The federal government has more or less endorsed the idea that these huge deductibles are acceptable, and that has been part of the problem,” Woolhandler said.