The same affordability issues that low-income families experienced a decade ago have begun to affect middle-income families today
By Jessica S. Banthin, Peter Cunningham and Didem M. Bernard
Health Affairs
January/February 2008
In the first part of this decade, health care costs continued to increase at rates far above general inflation, and employers increasingly shifted these higher costs to workers in the form of higher out-of-pocket payments for premiums, deductibles, and copayments. Adding to the pressure on families was slower economic growth during 2001-2004, which resulted in increases in poverty rates and the number of uninsured people.
Families’ health care burden
We define health care burden as the ratio of total family out-of-pocket spending for health care services and premiums over total family income.
High-burden individuals
People who live in families that spend more than 10 percent of family income on health care are defined as individuals with high burdens.
Study Results
Financial burden of health care
The financial burden of health care increased for American families during the first part of this decade as a result of rising out-of-pocket spending for health care and stagnant family incomes. Between 2001 and 2004, the percentage of the nonelderly population living in families with high out-of-pocket health care burdens rose from 15.9 percent to 17.7 percent. By 2004, 45.4 million people lived in families with high burdens—an increase of almost six million from 2001.
Increases in out-of-pocket spending between 2001 and 2004 were driven by both increases in health insurance premium payments and spending on health care services. Even after general inflation is accounted for, total out-of-pocket spending on health care rose by $373 to $2,656 in 2004, an increase of about 16 percent over the three-year period. In contrast, average family incomes not only failed to keep pace with rising out-of-pocket spending during this period but were largely unchanged after general inflation was accounted for.
Health insurance coverage and financial burden
The increase in families’ financial burdens was driven entirely by people with private (employer-sponsored) insurance: 17 percent (or twenty-nine million people) faced high burdens in 2004, an increase of 2.3 percentage points from 2001. Together, out-of-pocket spending for premiums and services rose $553 to $3,211, a 21 percent increase over the period.
Although relatively small in number, people covered by private policies purchased in the nongroup market were much more likely than those in any other insurance group to bear high financial burdens during 2001-2004. This was because people with private nongroup insurance must pay the entire premium, and benefits in such plans are often less generous than those in employer-sponsored plans. Moreover, the percentage of people with nongroup plans experiencing high out-of-pocket burdens rose dramatically, from 39 percent in 2001 to 52.7 percent in 2004.
Financial burden and income
The burdens were highest among poor (less than 100 percent of the federal poverty level) and low-income (100-199 percent of poverty) people with private insurance, a subgroup of particular policy concern. We found that 53.5 percent of poor and 37.4 percent of low-income people with private insurance faced high financial burdens in 2004, about two times as high as middle-income people faced and four times as high as high-income people faced. Moreover, financial burdens increased between 2001 and 2004 for low-income people, which indicates that private coverage was becoming less affordable for this group. At the same time, one out of five privately insured people with incomes of 200-399 percent of poverty (middle income) spent more than 10 percent of their income on health care, a rate that is twice as high as that for higher-income people.
Discussion
Compared to poor and low-income people, the prevalence of high financial burdens during our study period was much lower for privately insured people in middle-income families. Still, one out of five privately insured people in middle-income families faced high financial burdens, and this number is likely to increase in future years as health care costs continue to outpace growth in family incomes. Thus, the same affordability issues that low-income families experienced a decade ago might affect middle-income families in the future.
http://content.healthaffairs.org/cgi/content/full/27/1/188
Comment:
By Don McCanne, MD
The policy lesson? One-fifth of privately insured, middle-income people are already classified as “high-burden individuals” because they live in families that spend more than ten percent of their family income on health care, “and this number is likely to increase in future years as health care costs continue to outpace growth in family incomes.”
The failure of private insurance to provide affordable health care has already become a crisis for middle-income America. Current proposals to provide us with even more deteriorating private insurance plans amount to no more than a cruel joke by the policy/political community. But who’s laughing? Listen carefully. It sounds like sobbing to me.
