Sept. 16, 2010
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Funded by the Robert Wood Johnson Foundation (RWJF), the study’s objective was to examine whether the affordability threshold for medical care—defined as the amount of spending that leads to problems paying medical bills—changes over time. The question is important for policy makers because the recently enacted national health reform law established affordability standards to determine subsidies for lower-income people purchasing coverage through insurance exchanges scheduled to come online in 2014.
“The study shows that higher out-of-pocket spending for health services explains only a part of the increase in medical bill problems, especially for lower-income people,” said HSC Senior Fellow Peter J. Cunningham, Ph.D. “This indicates that the affordability of medical care declined between 2003 and 2007 as other financial pressures increased on families.”
While the study did not explicitly identify what other factors contributed to the increase in medical bill problems, Cunningham suggested that changes in the economy, including higher fuel prices, home foreclosures and the looming recession, may have heightened families’ economic anxiety.
The study, titled “Explaining the Increase in Family Financial Pressures from Medical Bills Between 2003 and 2007: Do Affordability Thresholds Change Over Time?” was based on an analysis of HSC’s 2007 Health Tracking Household Survey and 2003 Community Tracking Study Household Survey, both funded by RWJF. The samples in the study were restricted to people under age 65 with employer health coverage, including 27,000 people in the 2003 survey and 9,600 people in the 2007 survey.
The proportion of people under age 65 with employer coverage in families with medical bill problems increased from 12.5 percent in 2003 to 15.4 percent in 2007, according to the study. After adjusting for general inflation, family out-of-pocket spending on health services increased from $961 in 2003 to $1,318 in 2007 (a 37% increase), while family income increased 10 percent. As a result, out-of-pocket spending relative to family income increased from 2.2 percent on average in 2003 to 2.8 percent in 2007.
A much larger share of lower-income people under age 65 with employer coverage—income below 300 percent of poverty, or $61,950 for a family of four in 2007—had medical bill problems in 2007—27.3 percent for lower income vs. 10.1 percent for higher income, according to the study. Likewise, out-of-pocket spending relative to family income was more than three times higher in 2007 among lower-income people—5.3 percent for lower income vs. 1.7 percent for higher income.
Using a simulation that controlled for changes in out-of-pocket spending and other characteristics of families, the study found that even if out-of-pocket spending relative to family income had not increased, the proportion of people with medical bill problems would still have increased from 12.5 percent in 2003 to 14.1 percent in 2007. This means increased out-of-pocket spending for health services accounted for less than half (45%) of the rise in medical bill problems. Increases in out-of-pocket spending accounted for even less of the increase in medical bill problems for lower-income people—about 19 percent.The article concludes that, “Federal budget constraints likely preclude any further subsidies to limit out-of-pocket spending in the near term. Nevertheless, policy makers should take into account the fact that affordability thresholds among families change over time, likely decreasing during periods of severe economic downturns. This is important because the financial stress from medical bills is strongly associated with individuals going without needed medical care. And just as the federal government has provided temporary subsidies for laid-off workers to purchase continuation coverage from their former employer (COBRA coverage) during the recent recession, policy makers could consider temporarily increasing subsidies or adjusting income eligibility requirements for receiving subsidies during economic downturns for persons who purchase coverage through an insurance exchange.”
The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nations changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded in part by the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research.