Health Care Costs and Financing

The financial burden of health care felt by low-income families a decade ago may now affect middle-income families

With soaring health care costs, private insurance may no longer provide sufficient financial protection for a growing number of American families, reveals a new study. Jessica S. Banthin and Didem M. Bernard, of the Agency for Healthcare Research and Quality, with colleague Peter Cunningham of the Center for Studying Health System Change, analyzed data from the national Medical Expenditure Panel Survey (MEPS) from 2001 to 2004. They found that the rise in out-of-pocket health care expenses, along with stagnant incomes, led one in five privately insured people in middle-income families to face a high financial burden by 2004.

Two times as many poor and low-income, privately insured persons faced high financial burdens in that year. Also greatly affected were individuals with nongroup coverage, whose financial burden increased by more than a third from 2001 to 2004. This situation creates problems because families who find it hard to pay their medical bills often delay or forego needed medical care, note the researchers. They defined health care burden as the ratio of total family out-of-pocket spending for health care services and premiums to total family income. Even after accounting for inflation, total spending for premiums and services rose $553 to $3,211, a 21 percent increase over the period, while family incomes were largely unchanged.

The increase in families' financial burdens was driven entirely by people with private (employer-sponsored) insurance. Among persons with nongroup insurance plans, 52.7 percent had high out-of-pocket burdens in 2004, an increase from 39 percent in 2001. There was no change in financial burdens among the uninsured and those with public coverage. Recent projections estimate that both overall private health insurance costs and out-of-pocket spending will continue to rise by about 6-7 percent annually through 2016.

See "Financial burden of health care, 2001-2004," by Drs. Banthin, Cunningham, and Bernard, in the January/February 2008 Health Affairs 27(1), pp. 188-195, 2008.

Reprints (AHRQ Publication No. 08-R032) are available from the AHRQ Publications Clearinghouse.

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