AHRQ Brief on Out-of-Pocket Expenses

Concern about the financial impact of health spending on consumers was a motivating factor for passage of the reform law.  Health spending by consumers has two primary components–the portion of health insurance premiums paid and out-of-pocket spending on services received.  An Agency for Healthcare Research and Quality Statistical Brief looks at out-of-pocket spending for health services across various groups of patients.  (AHRQ Brief)  The data is from 2011.  As would be expected, similar to overall health spending, out-of-pocket costs for health services are highly concentrated.  About $185 billion was spent out-of-pocket, or 14% of total community-based health care spending of $1.33 trillion.  The top 1% of spenders accounted for 18.3% of all out-of-pocket costs, with an average for 2011 of $10,924.  the top 5% represented 43.2%, with an average of $5,141, while the top 10% accounted for 59.3%, at an average $3,525.  The bottom 50% of the population only accounted for 2.5% of all out-of-pocket spending.  To give you a sense of how many people have relatively high out-of-pocket costs, 21.5 million Americans had costs over $2,000 a year, while 4.8 million had spending over $5,000. In terms of categories of care, 12.1% of outpatient care was paid for out-of-pocket, only 3.1% of hospital inpatient was and 19.7% of drug spending.  The elderly were obviously far more likely to have high out-of-pocket costs than younger Americans.  And out-of-pocket spending becomes more concentrated for younger cohorts; or put another way, a greater percentage of older cohorts have significant out-of-pocket spending.  Poorer Americans also have a higher level of concentrated out-of-pocket spending.

People with private insurance had the least concentrated out-of-pocket costs, with the top 5% accounting for only 36.5% of all out-of-pocket spending among this group, although they had the highest average spending at $5,718.  Those on Medicare or Medicaid, the top 5% represented 69.7% of total costs, with an average of $2,977.  And for the uninsured the top 5% was 56.3%, an average of $4,602. In general, the uninsured might have low out-of-pocket spending both because the lack of insurance may cause them to defer services or because so many in this group are young and need few services.  When they do seek health care, however, they are by definition paying for it themselves, leading to high average costs.  The public number is misleading in combining Medicare and Medicaid, because people with Medicare do have significant copays and a deductible, while most Medicaid coverage has little cost-sharing.  Ironically, although the reform law was supposed to limit the financial impact on consumers, for many it is having the opposite effect.  Premiums are higher than before the law for most people and the benefit design is worse, leading to higher copayments and deductibles.  And that does not take into account the higher taxes to pay for the cost of the “reform”.  Or the higher cost that gets baked into most goods and services because companies are paying more for health care and higher taxes.  Enjoy!