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© Frank


The Cost of Care

by Sara Collins
September 23, 2020

This interview with Sara Collins, vice president for health care coverage and access at The Commonwealth Fund, was conducted and condensed by franknews. 

Sara | I lead the healthcare coverage and access program at the Commonwealth Fund. I also lead the tracking health system performance initiative, which is a research initiative that tracks state by state performance on a variety of measures.

We just released a report on health insurance coverage in the United States based on a survey we do every other year. In addition to looking at how many people were insured, we created a metric to examine how many people are underinsured. We define underinsured as those whose out-of-pocket costs are equal to 10% or more of their income, 5% if they have lower-incomes, or if their deductible is 5% or more of their income. Our goal is to look at how many people are exposed to high out-of-pocket costs relative to their incomes. How many people are insured all year, but have such high out-of-pocket costs and deductibles as a share of their income that they are effectively uninsured? 

frank | Can you lay out the landscape of your findings regarding healthcare and affordability?

In our biennial survey that we have conducted since 2001, we asked working-age adults if they have had difficulty paying their medical bills. Over time, we have seen growth in the share of people who had any problem in paying their medical bills. That includes those who are not able to pay their medical bills, those who were contacted by a collection agency for unpaid medical bills, or those who have to change their way of life in order to pay the bills or were paying off medical debts over time.

Since we started, there has been a gradual trend upward in the share of people reporting any one of those problems. It peaked at about 41% in 2012, and then as more people got health insurance with the passage of the Affordable Care Act, we saw a slight decline. But the percentage of people never really fell that much. 

This year, just over a third of people in the adult population reported having any one of those problems in paying their medical bills. 

The rates are the highest among people who are uninsured or were uninsured anytime over the past year. About half the people who were underinsured reported problems paying their medical bills.

What sort of long term implications do these medical bills have?

This has implications for the rest of people's lives. In our survey we asked if they were having other financial problems because of medical bills, including using up all their savings, receiving a low credit rating, taking out credit card debt, or being unable to pay for basic necessities. 

Out of those who had any medical bill problem, 37% used up all their savings, 40% received a lower credit rating, 31% took out credit card debt, and 26% were unable to pay for basic necessities. 

We can see that there are significant lingering financial implications for those with medical bills.

What explains the increase you have been seeing over the last decade?

Over the last decade, people's incomes haven't grown very much, but their out-of-pocket cost exposure has grown and their deductibles have grown. 

If you are getting coverage through an employer, which is where half of the working-age population gets their benefits, in most years the cost of your premiums is rising. Premiums are driven by health care costs. People are having to contribute more towards their premiums, and they are seeing increases in the amount they have to pay out of pocket in copays when they get healthcare. And incomes are not rising very quickly as people make wage concessions to receive their healthcare.

That means that people are paying more for their healthcare, have lower wages, are often more exposed to out of pocket costs.

Why are premium costs so high? Does it accurately reflect the cost of providing assistance on the part of providers? 

In private insurance, much of the growth we are seeing in premiums comes from growth in the prices that are paid to hospitals and other providers.  Prices vary significantly across the country. There's no consistent pattern. Provider prices generally have very little relationship to the actual cost of healthcare. They're determined by local market conditions.

Providers that have a lot of leverage in markets are able to increase their prices.  In other product markets, the cost of production drives the price of a good, but healthcare is different.

Costs aren’t driven so much by the actual cost of providing care, but from the price that providers are able to charge for services. 

Why don't we see that significant of a fall with ACA?

The ACA made critical changes in the individual market. It made sure that people were able to get a plan, and that those with preexisting conditions were able to get a plan. The subsidies from the ACA were also important in enabling people with lower incomes to get coverage.

But the trend in private coverage, the trend of rising premiums and wage stagnation, has continued, and that affects individual markets too. It covers people but still exposes many people to high out of pocket costs. Deductibles are taking up a larger percentage of people's income. 

What sort of healthcare reform could drive lower costs?

The primary value of both a public option and a single-payer approach is the ability to leverage down the primary drivers of healthcare costs. 

And think about what I mentioned about what's driving premiums -- and that is the prices that providers are paid in commercial insurance. A public option provides the federal government with some leverage to negotiate those prices down close to Medicare prices. The cost of covering everyone could be lower with a public option or with a Medicare for all approach.  

How do costs and the threat of debt affect people's willingness to seek care?

The higher people's out pocket costs are the more likely they are to say that they didn't get care because of cost. If they are uninsured we see the same thing.

On the same survey, we asked a set of questions about delaying care because of cost. About 56% of people who were uninsured anytime answered yes, and about 43% of people who were underinsured answered yes.

Out of pocket costs are leading people to make decisions that are not in the best interests of their health. It's a significant issue and the pandemic has shone a bright light on the dangers of having high out of pocket costs that lead people to decide against getting the care they need to stay healthy.