Out of Pocket Burdens for Health Care: Insured, Uninsured, and Underinsured Jessica Banthin, Ph.D. September 23, 2008

Disclaimer The views expressed in this presentation are those of the author and no official endorsement by the Department of Health and Human Services or the Agency for Healthcare Research and Quality is intended or should be inferred. This presentation drawn from various papers, reflecting joint work with Dr. Didem Bernard and Dr. Thomas Selden of AHRQ.

Research Questions How have rising health care costs affected family budgets? How have rising health care costs affected family budgets? How many individuals are underinsured? How many individuals are underinsured? How does risk of high out of pocket health care burdens vary by: How does risk of high out of pocket health care burdens vary by: – income status – insurance status – age and gender – presence of chronic conditions

Data: Medical Expenditure Panel Survey The MEPS is annual survey sponsored by Agency for Healthcare Research & Quality The MEPS is annual survey sponsored by Agency for Healthcare Research & Quality Nationally representative household survey consisting of 15,000 households and 39,000 individuals Nationally representative household survey consisting of 15,000 households and 39,000 individuals Includes data on insurance coverage, health care utilization and expenditures, health status, medical conditions, & more Includes data on insurance coverage, health care utilization and expenditures, health status, medical conditions, & more Most accurate source of nationally representative micro level data on out of pocket spending for medical care Most accurate source of nationally representative micro level data on out of pocket spending for medical care Released on public use files, tables, statistical briefs: Released on public use files, tables, statistical briefs:

Defining Underinsured Numerator: We calculated total out of pocket spending across all individuals in the family Numerator: We calculated total out of pocket spending across all individuals in the family Denominator: We calculated total family income and adjusted for taxes Denominator: We calculated total family income and adjusted for taxes We identify individuals living in families that spend more than 10% of family income on out of pocket expenses – “underinsured” We identify individuals living in families that spend more than 10% of family income on out of pocket expenses – “underinsured” Defined at family level because family members share resources and are affected by expenses of other family members Defined at family level because family members share resources and are affected by expenses of other family members

Insurance Groups, 2005 Population, Under Age 65 Mean Annual After Tax Income Private Employer Sponsored million $59,637 Private Non- Group Market 9.7 million $53,519 Public 41.8 million $21,354 Uninsured 36.4 million $27,451

Family Level Out of Pocket Expenditures by Insurance Group, 2001 and 2005

Percent Underinsured by Insurance Group, 2001 and 2005

Poverty Status Groups, 2005 % of Federal Poverty Line Mean Annual After Tax Income, Poor < 100% $10,116 2 Low Income %$24,551 3 Lower Middle Income %$35,464 4 Upper Middle Income %$47,178 5 High Income 400% + $79,477

Percent Underinsured by Poverty Status, 2001 and 2005

Number Underinsured, 2005 About 15.8 million insured individuals were underinsured in 2005 using the 10% threshold About 15.8 million insured individuals were underinsured in 2005 using the 10% threshold About 20.8 million were underinsured using a 5% threshold for persons below 200% of poverty and 10% threshold for others (Commonwealth Fund definition) About 20.8 million were underinsured using a 5% threshold for persons below 200% of poverty and 10% threshold for others (Commonwealth Fund definition) Small, but statistically significant increase from Small, but statistically significant increase from 2001.

What about premiums? Out of pocket premium contributions are predictable and can be budgeted for, therefore they are not counted in the numerator for estimates of the underinsured Out of pocket premium contributions are predictable and can be budgeted for, therefore they are not counted in the numerator for estimates of the underinsured But – plans trade-off premiums and deductibles/copayments But – plans trade-off premiums and deductibles/copayments Premium growth has been substantial Premium growth has been substantial

Defining Individuals with High Burdens for Total Spending Numerator: We calculated total out of pocket spending across all individuals in the family Numerator: We calculated total out of pocket spending across all individuals in the family Include out of pocket premium payments in numerator Include out of pocket premium payments in numerator Denominator: We calculated total family income and adjusted for taxes Denominator: We calculated total family income and adjusted for taxes We identify individuals living in families that spend more than 10% of family income on out of pocket expenses – “high burden” We identify individuals living in families that spend more than 10% of family income on out of pocket expenses – “high burden”

Out of Pocket Premiums, 2001 and 2005

Financial Burdens by Chronic Disease 2003 Likelihood of facing high financial burden: – All persons, 19.2% – Diabetes, 39.1% – Stroke, 56.0% – Heart disease, 32.7% – Hypertension, 30.9% – Arthritis, 30.7% – Mental disorder, 29.2%

Conclusion Both measures are useful for policy Both measures are useful for policy Tracking trends in underinsured and high financial burdens provides policymakers with overview of issue Tracking trends in underinsured and high financial burdens provides policymakers with overview of issue Identifies subgroups with elevated risk for high burdens Identifies subgroups with elevated risk for high burdens Helps inform debate on affordability issue Helps inform debate on affordability issue Also provides benchmark against which to measure proposed changes in policy Also provides benchmark against which to measure proposed changes in policy