Health Affairs: Rising healthcare costs, flattening family income predate recession

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The percentage of nonelderly Americans with high financial burden from healthcare spending increased from 16.4 percent in 2004 to 19.1 percent in 2006 while almost 30 percent of the U.S. population either had a high financial burden of health costs or were uninsured from 2001 to 2006, according to an article published online March 26 in Health Affairs.

To stop and reverse the increasing number of families with high healthcare cost burdens, strong economic growth must be accompanied by both increases in family incomes and more moderate increases in healthcare costs, wrote study author Peter J. Cunningham, PhD, senior fellow at the Center for Studying Health System Change in Washington, D.C. During a five-year period from 2001 to 2006, the percentage of Americans with high financial burden increased, on average, by about one percentage point per year, he said.

Cunningham analyzed data from the 2001-2006 Medical Expenditure Panel Survey (MEPS), a household survey sponsored by the Agency for Healthcare Research and Quality that collects information including healthcare expenditures and use of services, insurance coverage, sources of payment, health status, and employment, to show the correlation between state variations in high financial burden as well as total family health expenses, income, enrollment in health maintenance organizations and the prevalence of major chronic conditions.

Sample sizes were about 28,000 people for each survey year with U.S. estimates weighted to be representative of the U.S. civilian, non-institutionalized population under age sixty-five.

“Although the results reported in this paper predate the recent recession, between 2004 and 2006 there were increases in the proportion of Americans with high financial burden (families that spend more than 10 percent of their income on healthcare) at a time when the nation’s economy was relatively strong and unemployment was low,” wrote Cunningham.

During 2004 to 2006, the average health insurance premium increased 8.5 percent annually. However, after accounting for general inflation, family incomes remained stagnant during that time frame, the study found.

Cunningham also reported that there was substantial variation in levels of financial burden across states. For example, the proportion who were insured with high financial burden ranged from a high of one-quarter of the nonelderly population in Alabama and Oklahoma to a low of 12.4 percent in California.

Some state variation in high financial burden is likely to remain even if national reform is implemented, wrote Cunningham. Based on the Affordable Health Care for America Act passed by the House of Representatives in November 2009, “a family of three whose income is 300-400 percent of poverty will still be required to pay up to 10-12 percent of their family income on health insurance premiums alone,” wrote Cunningham.

“Thus, subsidizing private coverage and expanding public coverage for lower- and moderate-income families alone is not sufficient to stem the increase in high financial burden or to reduce the variation in financial burden across states,” concluded Cunningham. “To stem the increase in financial burden among families at higher income levels, and to sustain proposed subsidies to lower-income people, it will be essential to combine cost containment efforts in healthcare along with achieving real gains in family income.”

The report was supported by the Commonwealth Fund, a private New York City-based foundation supporting independent research on health care issues.