Health care squeezes family budgets

As state and federal lawmakers grapple with skyrocketing health-care costs, households across America are doing the same.

Expecting health reform to provide relief is wishful thinking.

In less than a decade, the annual health-care costs for a typical family have more than doubled, to $19,400. That is the price of a 2011 Hyundai Sonata. The average family bears about 40 percent of that cost, with employers paying the rest. However, a more realistic view is that employees pay for all of it because most wage-and-benefit increases go toward health-insurance costs.

Most people have only a vague notion of how valuable health insurance can be. The median household income for a four-person U.S. family in 2009 was about $70,300. However, the Congressional Budget Office (CBO) estimates the true figure to be $94,900. A footnote on page 65 of a CBO budget forecast said this: “All income is assumed to be from compensation, which includes employment-based health insurance and the employer’s share of payroll taxes.”

That additional value does not mean much to those living paycheck to paycheck. Each family has a different financial pressure point. The media often focus on catastrophic costs inflicted on people with no insurance. The broader story of health-care costs is about financial strain spread across a wide swath of American households. The pain affects much of the middle class and some of the upper middle class as well, including those with employer-sponsored insurance.

Americans actually pay a far lower share of health expenses than they used to. The main purpose of health insurance originally was to cover catastrophic episodes. Before the introduction of Medicare and Medicaid in 1965, patients paid more than half the cost of care out of pocket. That shrank to 15 percent in 2008. Meanwhile, private health plans’ share of the bill rose from 21 to 35 percent and government’s portion doubled, to 50 percent. The perception that medical bills are the responsibility of someone other than the patient has been a prime contributor to health-care demand over the past four decades.

A Deloitte study estimates that consumers pay an additional 15 percent out of pocket on personal health not captured by government statistics. These costs include unpaid caregiving, over-the-counter medications, and complementary and alternative medical care not covered by insurance.

The inability to pay medical bills and buy prescription drugs is the most persistent household finance problem, according to a recent Consumer Reports poll. About 40 percent of Americans had trouble paying medical bills in 2010, up from 34 percent in 2005. More than one-quarter of insured households reported problems with medical debt.

Even more disturbing is widespread self-rationing. Nearly 6 out of 10 adults said they delayed care because of cost. About 40 percent of those in fair or poor health did not fill at least one prescription in the past year. People with chronic conditions who fail to take medication are flirting with disastrous consequences.

Americans generally cite lack of access as the greatest obstacle to health care, followed by costs. Lack of access can mean several things. In some instances, people cannot see a physician or specialist promptly. Nearly 60 percent say they cannot find care after physician office hours, 40 percent cannot get service by phone and 30 percent cannot get a timely office appointment.

Increasingly, though, lack of health-care access means not being able to afford it.

According to an ongoing household survey, the incidence of delaying needed care rose sharply between 2003 and 2007. Insured people are among those facing cost pressures. They are paying more out-of-pocket for care, finding fewer doctors who accept their insurance and facing more limits on what insurance will cover. During those four years, the percentage of those with unmet medical needs increased more among the insured than the uninsured.

It is difficult to pinpoint when health-care costs become burdensome. The Center for Studying Health System Change found that financial pressures increase significantly after out-of-pocket spending exceeds 2.5 percent of family income. Unlike a mortgage, groceries and utilities, medical costs are less predictable and often unexpected. High medical expenses generally are urgent and associated with serious conditions. Significant injury or disease may also result in loss of income. Even two-thirds of Americans earning more than $75,000 a year worry about getting or paying for future care.

Women experience greater cost and access problems. More than half of women have trouble getting care, and more than 60 percent under age 65 have difficulty paying medical bills. Women use the health-care system more than men do. They often must make choices between getting care or paying credit-card bills, the mortgage or for basic necessities.