Out of pocket costs soar and the middle class reels

Sepatuads.com   Agustus 29, 2016   Brookings Institute, concentration of cost, Hamilton Project, Kaiser Family Foundation, Middle class, Out of Pocket, Wall Street Jou   Comment  

Today’s Managing Health Care Costs Number is $2679

Friday’s Wall Street Journal highlighted research published by Kaiser Family Foundation and Brookings Institute  earlier this year.   The WSJ noted that out of pocket expenses are going up – hitting the middle class especially hard.  

David Cutler, a Harvard health-care economist, said this may be “a story of three Americas.” One group, the rich, can afford health care easily. The poor can access public assistance. But for lower middle- to middle-income Americans, “the income struggles and the health-care struggles together are a really potent issue,” he said.

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Diane Schantzenbach of Brookings shows the “crowd out” impact of the high cost of health care (and housing). This has led to fewer dollars being available for other uses, including food clothing and transportation.   The researchers don’t quantify impact on savings for education and retirement, or vacation expenses.

The WSJ article also quoted the April KFF research by Gary Claxon and coauthors that showed the dramatic increase in deductibles and conversion from copayments to coinsurance.  This has profound impact on patients- it means that those who obtain the most expensive care pay a higher amount out of pocket – and it creates enough uncertainty about how much patients will owe that it discourages use of care that appears to patients to be discretionary. 

This move has also changed the compact of social insurance.   There is now less subsidy of those with higher costs than there was in the past – meaning that employer-sponsored health insurance is less likely to shield families with substantial illness from financial ruin than in the past.   I’ve displayed the 2004 and the 2015 KFF data graphically; this how much more out of pocket costs are borne by those at the top 15% of cost. 

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This fails to demonstrate is how much higher still the out of pocket costs are for those in the top 5% of costs (who represent 49% of all costs)., or those in the top 1% of costs (who themselves represent 21% of all costs.    Out of pocket maximums provide some protection, but these are increasingly calculated across the entire family – leaving families with a “bronze” style plan often responsible for at $12,000 or more in annual costs.