Description
The Out-of-Pocket Healthcare Expenditures in the United States
Out-of-pocket expenditures for health care products and services in the United States continue to rise and in 2015 represent a significant portion of consumers’ incomes. This is the result of a variety of factors including an aging U.S. population, rising utilization of medical products and services, and ongoing cutbacks to both public (federal and state) and private health coverage. Over the years, U.S. consumers’ annual out-of-pocket health care costs have risen from about $250 per person in 1980 to $1,300 in 2015, with yearly increases of about $40 to $50. Increases for health plan premiums, in particular, have outpaced increases in overall prices and workers’ earnings.
This Kalorama Information report, Out-of-Pocket Spending n the United States, details the trend of consumers purchasing their healthcare with their own cash or credit cards and/or various financing programs. Included in this report’s analysis is the following:
- Total Spending By Consumers
- Proportion That is Cash, Credit Card, HSA and Other Programs
- Co-Pay Spending, 2009-2014 and Projected to 2019
- Premium Spending, 2009-2014 and Projected to 2019
- Direct Healthcare Purchases, 2009-2014 and Projected to 2019
- Elective Spending
- Non-Elective Spending
Direct payments represent payments made from consumers directly to health care providers without reimbursement by insurers. For the uninsured and many underinsured, such payments represent the primary means of funding health care. For those with health care insurance, direct payments supplement plan payments. Initially, direct payments will be made to meet deductible levels; after that, direct payments may be required to meet plan co-payments in the case of plans that do not fund 100% of expenses after deductibles are met. This is the case for a growing number of plans that pay 80% to 90% of expenses after deductibles. Furthermore, many plans also set limits on payments for certain products or services, so that participants must self-fund further expenditures after those limits are met. Thus, direct payments may be made by both uninsured and insured persons. For both groups, however, the size of direct payments for health care continues to rise.
Health care premiums represent fees paid by plan participants to maintain membership in the plan. Unlike co-payments and deductibles, they are not tied directly to receipt of products or services. As the single most important way that health care plans are financed, premiums continue to rise as MCOs attempt to offset their own increasing expenses. In 2013, the most recent year for which data is available, HMO premiums rose by more than 10%, according to Hewitt Associates. Much of this growth is attributed to healthcare price increases in excess of inflation (such as through the utilization of higher-priced technologies) and about one quarter is the result of increased utilization.
Co-payments may be set either at a fixed rate or as a proportion of the cost of each covered product or service. Over the past two decades, co-pays have been rising as MCOs continue to utilize them as a means to both help offset payments to providers and encourage/discourage certain consumer behaviors. For example, co-payments are often set higher on more expensive alternatives (new and/or brand name medicines, utilization of out-of-network providers, innovative procedures, etc.) and lower on less expensive choices (generic and/or lower cost medicines, etc.).
Consumers in the United States utilize a variety of methods to pay for health care products and services. These are required in instances when payment is not made directly from a health care plan directly to the provider. The key payment methods utilized are:
- cash or check;
- credit cards;
- loans and lines of credit;
- flexible spending accounts;
- health savings accounts;
- medical financing.
Consumers from all socioeconomic groups are facing high out-of-pocket expenditures for health care. However, certain groups are more vulnerable to this threat and represent a larger proportion of total such spending. These include:
- the uninsured and underinsured;
- Medicaid recipients;
- disabled persons;
- senior citizens;
- the mentally ill;
- obese persons;
- persons with chronic medical conditions.
Table of Contents
CHAPTER ONE: EXECUTIVE SUMMARY
Out-of-Pocket Spending
CHAPTER TWO: INTRODUCTION
Types of Expenditures
Insurance Co-Payments
Direct Payments
Premiums and Plan Fees
Payment Methods
Cash or Check
Credit Cards
Loans and Lines of Credit
Flexible Spending Accounts
Health Savings Accounts
Medical Financing
Amount Financed
Elective Procedures
Non-Elective Procedures and Prescription Drugs
Non-Elective Procedures and Prescription Drugs
Consumers Who Pay Out-of-pocket
The Uninsured and Underinsured
Medicaid Recipients
Persons with Chronic Conditions
Trends
Out-of-pocket Expenditure Growth Drivers
Out-of-pocket Expenditure Growth Constraints
CHAPTER THREE: MARKET ANALYSIS
Forecasts
Expenditures by Type
Payment Methods
Amount Financed
Types of Expenses Financed
Consumers Who Pay Out of Pocket
LIST OF EXHIBITS
CHAPTER ONE: EXECUTIVE SUMMARY
Figure 1-1
Out-of-Pocket Spending on Healthcare in the United States (billions)
CHAPTER TWO: INTRODUCTION
Figure 2-1
Premium Increases vs. Increases in Workers Earnings and Prices, 2000 – 2014
Figure 2-2
Consumer Out-of-pocket Health Care Expenditures, 2014(Co-pays, Direct Payments, Premiums)
Figure 2-3
Consumer Out-of-pocket Health Care Expenditures by Payment Type, 2014 (HSAs, Health Care Financing Programs, Loans or Lines of Credit, FSAs, Credit Cards, Cash or Check )
Table 2-1
Main Business Activities of Selected Medical Financing Companies, 2014 (Financing Elective Procedures, Financing Non-Elective Procedures, Non-Medical Consumer Credit)
Figure 2-4
Average Out-of-pocket Payment by U.S. Residents with Health Care Spending by Percentile of Total Health Spending, 2014 (Cosmetic Surgery, Cosmetic Dentistry, Eye Procedures,
Chiropractic Services, Hair Restoration, Fertility Treatments, Weight Loss , Other)
Figure 2-5
Methods of Financing Elective Procedures, 2014 (Loans or Lines of Credit, Cash or Check, Health Care Financing Programs, Credit Cards)
Figure 2-6
Average Share Paid Out-of-pocket by U.S. Residents with Health Care Spending by Type of Service, 2014 (Hospital, Outpatient, Office Based Visit, Prescription Drugs, Emergency
Room, Dental, Home Health, Vision, Other Health Care)
Figure 2-7
Average Share Paid Out-of-pocket by U.S. Residents with Health Care Spending by Percentile of Total Health Spending and Type of Service, 2014 (Hospital, Outpatient, Office Based Visit, Prescription Drugs, Emergency Room, Dental, Home Health, Vision, Other Health Care) 26
Figure 2-8
Distribution of Out-of-pocket Spending on Non-Elective Procedures for the Average Person, 2014 (Prescription Drugs, Emergency Room, Dental, Vision, Other Health Care, Hospital, Outpatient, Office Based Visit)
Figure 2-9
Distribution of Out-of-pocket Spending for the Average Person, by Spending Level, 2014(Hospital, Outpatient, Office Based Visit, Prescription Drugs, Emergency Room, Dental,Home Health, Vision, Other Health Care)
Figure 2-10
Drug Cost Coverage by Payor Type (Public, Private, Cash):1965, 1986, 2000, 2005, 2010, 2015
Table 2-2
Obesity in the United States, 1980 – 2019
Figure 2-11
Coverage of Adults under Age 65 with Chronic Conditions, 2014 (Privately Insured, Medicare orMedicaid, Uninsured, Other)
CHAPTER THREE: MARKET ANALYSIS – OUT-OF-POCKET SPENDING IN THE US, 2014— 2019
Table 3-1
Selected Rx-to-OTC Switches in the United States, 1990 – 2014
Table 3-2
Consumer Out-of-pocket Expenditures per Worker, 2009–2019
Table 3-3
Consumer Out-of-pocket Expenditures by Type, 2009–2019
Figure 3-1
Proportion of Consumer Out-of-pocket Spending by Type of Health Care Expenditure, 2009, 2014, 2019 (Direct Payments, Co-pays, Premiums)
Table 3-4
Consumer Out-of-pocket Expenditures by Type, 2009–2019
Figure 3-2
Proportion of Consumer Out-of-Pocket Spending by Payment Type, 2009, 2014, 2019 (Credit Cards, FSAs, Health Care Financing Programs, Cash or Check, Loans or Lines of Credit, HSAs)
Table 3-5
Amount of Consumer Out-of-Pocket Expenditures for Elective Procedures That Are Financed, 2009–2019
Table 3-6
Amount of Consumer Out-of-Pocket Expenditures for Non-Elective Procedures That Are Financed, 2009–2019
Figure 3-3
Proportio of Consumer Out of Pocket Spending for Elective Procedures (Cosmetic Surgery,
Consmetic Dentistry, Eye Procedures, Chiropractic Services, Hair Restoration, Fertility Treatment, Weight Loss Surgery)
Figure 3-4:
Distribution of Out-of-Pocket Spending on Non-Elective Procedures for the Average Person, 2014, 2019 (Hospital, Outpatient, Office Based Visit, Prescription Drugs, Emergency Room, Dental, Vision, Other Health Care)
Figure 3-5
Proportion of Consumer Out-of-Pocket Spending for Non-Elective Procedures That is Financed(All Methods), 2014 – 2019 (Hospital, Outpatient, Office Based Visit, Prescription Drugs,Emergency Room, Dental, Home Health, Vision)
Table 3-7
Size of High Risk Groups for High Out-of-Pocket Health Care Expenditures, 2009–2019(Uninsured and Underinsured, Medicaid Recipients, The Disabled, Senior Citizens, The Mentally Ill, The Obese, Persons with Chronic Conditions)
