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Health-Care Costs Straining U.S. Families

A quarter of households now spend over 10% of income on medical coverage, report finds

WEDNESDAY, Feb. 1, 2006 (HealthDay News) -- American families are having to dig deeper into their pockets to cover health-care costs.

A new report finds that, as of 2002, 15 percent of U.S. families (18 million households) had high out-of-pocket health-care costs relative to their income. "High" was defined as 10 percent or more of household income for all families and 5 percent or more of income for low-income families.

When premiums were included, the picture worsened, with 23 percent of U.S. families, or 27 million families, having to spend high levels of their total income on health care in 2002.

The data comes from a new report, Rising Out-of-Pocket Spending for Medical Care: A Growing Strain on Family Budgets, released Wednesday by the Commonwealth Fund.

Overall, between 1996 and 2002, health-care costs rose at a much higher rate than income, the survey found.

"We're finding a dramatic increase in the total number of families throughout the U.S. that are paying a high share of their income for medical bills," said Cathy Schoen, Commonwealth Fund senior vice president. "When you add in premiums, it's even higher."

All of which bodes ill for Americans' economic security.

"The findings again call into question the whole approach of shifting more costs onto consumers with consumer-driven health care," said Carol Pryor, senior policy analyst at the Access Project in Boston. "If you look at a single mom with a kid at twice the poverty level and you look at the required deductible, it's already about 7.5 percent of income and that excludes the cost of the premium and other out-of-pocket costs."

The new report used national data to analyze trends in out-of-pocket health-care spending between 1996-97 and 2001-02. Among the other findings:

  • Out-of-pocket health-care spending increased an average of 35 percent between 1996 and 2002, while the average family income grew only 20 percent.
  • Elderly individuals had the highest out-of-pocket spending, but non-elderly families took a hit as well. Ten percent of families without elderly members (about 10 million families) had high out-of-pocket costs. When premiums were added in, that number rose to 17 percent.
  • Low-income families also suffered disproportionately. "The first families that are feeling this in terms of a real squeeze are those that are on more restrictive incomes, those who can least afford it," Schoen said.

Overall, fewer and fewer people seem able to afford adequate health-care coverage, the report found.

"We're seeing people finding insurance itself unaffordable and this study is showing that even those who are insured may be barely hanging on," Schoen said. "It's a real squeeze on income and savings and economic security."

Unless action is taken to change the trajectory of rising health-care costs, Schoen added, the United States is likely to see many more people become uninsured.

"There is a growing awareness at all levels of how broken our system is becoming," Pryor said. "Health insurance is becoming increasingly unaffordable. The proposals that have dominated at the federal level are generally counterproductive, including health savings accounts."

The health savings accounts, which are a centerpiece of President Bush's health-care proposals, are "in no way a solution," she added. "We have to start wondering who is going to benefit from these plans. The other question is what are insurance companies doing with the ever-rising premiums and ever-eroding coverage? There's been very little attention to the practices of the insurance companies around these policies and the protection that they are offering or, in fact, do not offer consumers."

More information

View the full report at the Commonwealth Fund.

SOURCES: Cathy Schoen, senior vice president, Commonwealth Fund, New York City; Carol Pryor, senior policy analyst, The Access Project, Boston; Feb. 1, 2006, Rising Out-of-Pocket Spending for Medical Care: A Growing Strain on Family Budgets, Commonwealth Fund
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