Witness Testimony

HEALTH CARE COSTS AND INSTABILITY OF INSURANCE: IMPACT
ON PATIENTS' EXPERIENCES WITH CARE AND MEDICAL BILLS

Sara R. Collins

Thank you, Mr. Chairman, for this invitation to testify today on the growing affordability crisis in the U.S. health care system. The recent reports of uninsured patients struggling to pay exorbitant hospital bills have lent a human face to a health care system under enormous strain.[1] Growing numbers of Americans are experiencing gaps in their insurance coverage-gaps that expose them to the routine costs of preventive care as well as the catastrophic costs of serious accidents and illnesses. The number of people without health insurance climbed to 43.6 million in 2002, nearly 4 million more than were uninsured two years before (Chart 1).[2] At the same time, national health care spending grew at a rate of 9.3 percent in 2002, the highest annual increase in a decade (Chart 2).[3] Health insurance premiums rose even more rapidly, increasing by 13.9 percent in 2003, the third consecutive year of double-digit inflation (Chart 3).[4] Employers are responding to rising premiums by sharing more of their costs with employees and offering new insurance products that shift more financial risk to workers (Chart 4).[5] A severe fiscal crisis has led many state governments to restrict eligibility in public programs such as Medicaid and the Children's Health Insurance Program (CHIP)-a development that is likely to increase the number of people without coverage.[6]

The state of our nation's health care system is creating profound conflicts between providers, whose mission it is to care for patients, and patients, whose access to and trust in the health care system is crucial to the maintenance of a vital and productive society. Private and public health care providers spend an estimated $35 billion a year on care for uninsured patients that goes uncompensated.[7] At the same time, evidence from the recent Commonwealth Fund Biennial Health Insurance Survey shows that being uninsured or having gaps in insurance coverage interferes with people's ability to get the health care they need.[8] The Institute of Medicine warns that leaving more than 40 million people without insurance coverage costs the U.S. economy an estimated $65 billion to $130 billion annually in lost productivity.[9]

Rising health care costs are also creating conflicts in the workplace, as U.S. companies, for lack of other options, shift more health care risk to employees in the form of increased deductibles, greater premium sharing, and higher copayments. Yet, Americans already pay more out-of-pocket for their medical care than people in any other industrialized country.[10] Higher cost-sharing thus raises concerns that even people who have insurance coverage will forgo needed medical care, face out-of-pocket costs that might consume substantial shares of their income, or drop their coverage altogether.[11]

The Commonwealth Fund Biennial Health Insurance Survey, a nationally representative survey of more than 4,000 adults, interviewed people about the extent and quality of their health insurance coverage in late 2003. The survey revealed growing instability in insurance coverage, particularly among people with low incomes and minorities. In addition, the survey found evidence of erosion in the quality of benefits among people who have health insurance. Gaps in insurance coverage and rising health care costs are preventing large shares of both uninsured and insured Americans from getting the health care they need. The survey also found high rates of medical bill problems among uninsured and insured alike. Many families with medical debt face stark trade-offs between life necessities like food and rent and paying down their debt. Key findings from the survey and other recent reports are discussed below.

Insurance Coverage Is Becoming Increasingly Unstable

The Commonwealth Fund Biennial Health Insurance Survey shows that health insurance coverage is becoming increasingly unstable. In the survey, respondents were asked whether they were insured at the time of the survey and whether they had lacked insurance at any time during the previous 12 months. Twenty-six percent of adults ages 19 to 64 had experienced at least some time uninsured in 2003: 17 percent were uninsured at the time of the survey, and 9 percent had been uninsured during part of the previous 12 months (Chart 5). In 2001, the last year that the Commonwealth Fund survey was conducted, 24 percent of respondents were uninsured for at least part of the year.[12]

Insurance instability is particularly acute among people with low incomes. More than half (52%) of adults ages 19 to 64 in households earning less than $20,000 per year were uninsured for some time during 2003, up slightly from 49 percent in 2001.[13] The erosion of health insurance was most marked for families with incomes between $20,000 and $35,000-35 percent were without coverage during the year, up from 28 percent in 2001.[14] Sixteen percent of adults in households with incomes between $35,000 and $60,000 experienced a time without health insurance in 2003.

Minorities experience similarly high rates of instability in coverage. Nearly one-half (47%) of Hispanics were without health insurance at some point during the year in 2003, with more than one-third reporting that they were uninsured at the time of the survey (Chart 6). African Americans experienced a significant loss of coverage in the 2001-03 period: the share without coverage jumped from 27 percent in 2001 to 38 percent in 2003, with most of the increase attributable to an increase in those who were uninsured at the time of the survey (14% to 23%).[15]

Other recent analyses of surveys that track people over time shows that many low-income workers and minorities remain without coverage for years at a time. Research by Pamela Farley Short and colleagues found that from 1996 to 2000, 42 percent of children and adults under age 65 with incomes less than 200 percent of poverty had been uninsured for more than one year, and nearly 3 of 10 (28%) were uninsured more than two years.[16] Michelle Doty and Alyssa Holmgren of The Commonwealth Fund found that 37 percent of Hispanic workers with incomes under 200 percent of poverty who had been employed full-time in the 1996-2000 period were uninsured for the full four years.[17]

Insurance instability is also a serious problem among young adults ages 19 to 29. In the Commonwealth Fund survey, 40 percent of young adults said that they were without coverage at some point during the year. This is nearly twice the rate found for those ages 30 to 64 who experienced a time without coverage in 2003. Age 19 is a critical turning point in insurance eligibility among both privately and publicly insured young adults. Nearly 60 percent of employers who offer health benefits stop covering dependent children at age 18 or 19 if they do not go on to college.[18] The Medicaid and CHIP programs reclassify all children as adults at age 19, meaning that most low-income young adults become ineligible for public coverage, since eligibility for adults generally is restricted to very low income parents or disabled adults. Jobs available to young adults are usually low wage or temporary-the type that generally do not come with health benefits. A recent Commonwealth Fund report found that more than half of high school graduates who do not go on to college experience a time uninsured in the year following graduation (Chart 7).[19] Among those who do go on to college, graduation also marks a break in coverage-nearly two of five college graduates experience a time uninsured in the year following graduation.

Workers without insurance coverage are concentrated in small firms, which face greater costs for coverage than do large employers and higher financial risks from providing benefits to only a small pool of workers.[20] But the long-term shift away from manufacturing in the U.S. economy, coupled with declines in the rate of unionization in the workforce, has led to an increase in the share of uninsured workers employed in large firms. A recent Commonwealth Fund report by researchers Sherry Glied, Jeanne Lambrew, and Sarah Little found that from 1987 to 2001, the proportion of uninsured workers who were employed by firms with more that 500 employees grew from 25 percent to 32 percent (Chart 8).[21]

The Quality of Health Benefits Is Eroding

In addition to declining insurance coverage, the Commonwealth Fund Biennial Health Insurance Survey also finds evidence of erosion in the quality of coverage among those with health insurance. Working-age Americans reported that they were now paying more for their insurance coverage and more for their medical care than they were one year ago. Two of five (43%) adults under age 65 with private coverage who contribute to their premiums said that the amount they pay for premiums had increased by a moderate amount or a lot in the past year, with nearly one of five (19%) saying the amount had increased a lot (Chart 9, Table 1). More than half (58%) of those with coverage in the individual insurance market said that their premiums had risen by a moderate amount or a lot, with a third (34%) saying that their premiums had gone up a lot. More than a quarter (28%) of people with employer or individual coverage said that their share of medical bills had risen by a moderate amount or a lot.

In addition to paying more for their care, many privately insured adults also reported that their health plans are cutting back or placing new limits on covered benefits. The survey asked whether people had experienced reductions in the benefits covered by their insurance plans. Reductions could dropping coverage for prescription drugs, dental care, vision care, or mental health, or placing limits on benefits. About one-fifth (21%) of people with private coverage said that their benefits had been curtailed.

Taken together, increased premium shares, increased cost-sharing, and limits on benefits affected large percentages of the privately insured. Nearly half of those (49%) insured all year with private coverage said that they had experienced at least one of these erosions in the quality of benefits. People with coverage through the individual market were particularly hard-hit-61 percent reported a decrease in the quality of their benefits (Table 1). Among adults with employer coverage, erosion of health insurance benefits appeared to be most common among those in the highest income category, with 56 percent of those earning $60,000 or more reporting a decline in the quality of their coverage.

Many Americans Spend Substantial Shares of Their Earnings on Health Care

Depending on their insurance status or the particular provisions of their health plans, Americans pay different amounts for their health care and their insurance coverage. Most people with private insurance (employer-sponsored or individual) contribute to their health insurance premiums. According to the Commonwealth Fund survey, more than 75 percent of those with employer-sponsored coverage pay part of their premiums, with 10 percent of single policy holders and a quarter (26%) with family plans paying $2,500 or more annually (Table 2). Without an employer to shoulder part of their premium costs, and without the benefit of risk pooling in group plans, people with individual coverage pay much more for their premiums. One-third (34%) of single policy holders in the individual market pay $2,500 or more a year in premiums, and 15 percent have annual premiums of $5,000 or more. More than half (52%) of single policy holders in the individual market spend 5 percent or more of their income on premiums, and a quarter (26%) spend more than 10 percent.

Most (66%) adults with private insurance coverage have a deductible. Of those with employer-sponsored coverage, 15 percent have deductibles of $500 or more per year and 5 percent have deductibles of $1,000 or more (Table 2). Three-quarters of adults with coverage in the individual market pay a deductible: 44 percent have deductibles of $500 or more and 30 percent have deductibles of $1,000 or more.

Nearly everyone with private coverage pays something out-of-pocket when they obtain health care services. The Commonwealth Fund survey asks adults how much they had to pay out-of-pocket over the last 12 months, excluding premiums, for their own personal prescription medicines, dental and vision care, and all other medical services, including doctors, hospitals, and tests. Two of five (41%) adults with employer-sponsored coverage pay less than $500 annually in out-of-pocket costs, a third (36%) pay between $500 and $2,000 per year, 13 percent pay $2,000 or more per year, and 10 percent did not respond or did not know (Table 3). People with coverage in the individual market pay more than those with employer-sponsored coverage-23 percent have annual out-of-pocket costs of $2,000 or more.

Adults with low or moderate incomes spend the greatest share of their earnings on out-of-pocket health care costs. Of those with private coverage who had annual incomes of less than $20,000, 29 percent spent 5 percent or more of their income on out-of-pocket costs and 17 percent spent 10 percent or more (Chart 10). More than one-fifth (23%) of those in the next income bracket ($20,000 to $34,999) spent 5 percent or more of their income on out-of-pocket costs. Among those with annual incomes of $60,000 or more, just 2 percent spent that much on out-of-pocket costs.

The out-of-pocket costs of those who experienced a time uninsured are very different from those who were continuously insured by an employer. Nearly a quarter (23%) of those who were uninsured at the time of the survey had no out-of-pocket costs, while only 6 percent of those with employer coverage had no out-of-pocket costs (Table 3). This indicates that many of those without coverage did not access the health system, or received care that was partly or wholly subsidized. Still, for many of the uninsured, out-of-pocket payments account for a large share of their income: a third had annual out-of-pocket costs comprising 5 percent or more of their income, and 18 percent had costs of 10 percent or more. Those who were insured at the time of the survey but had experienced a time uninsured in the past year also spent large shares of their incomes on out-of-pocket costs. Nearly a quarter (23%) spent 5 percent or more of their income on out-of-pocket costs.

People who are insured by public insurance programs incur much lower out-of-pocket costs than do those in private plans. A third (31%) of those insured continuously by public insurance programs said they had no out-of-pocket costs. Another third (34%) had costs amounting to less than $500 per year. Yet, even low health care costs can figure prominently as a share of a tight household budget. One-fifth (19%) of those with public insurance coverage and household incomes under 200 percent of poverty spent 5 percent or more of their incomes on out-of-pocket costs. Those with employer-sponsored coverage in that income range fared somewhat worse: a quarter (26%) spent that much of their income on out-of-pocket costs.

Increasing Shares of People with and Without Insurance Report Problems Getting Needed Health Care Because of Cost

The decline in the quality of private health benefits and the increasing instability of coverage may be making it harder for people to access health care. The Commonwealth Fund survey asked respondents whether, in the last 12 months, they had not pursued medical care because of cost. Respondents were asked if they had not filled a prescription; had a medical problem but did not go to a doctor or clinic; skipped a medical test, treatment, or follow-up visit recommended by a doctor; or did not see a specialist when a doctor or the respondent thought it was needed. The share of people who reported any one of these problems increased from 29 percent in 2001 to 37 percent in 2003 (Chart 11). Those who were uninsured or who reported a gap in coverage were most at risk of encountering these access problems (Chart 12). Around 60 percent of this group reported that they did not get the care they needed because of cost. But those with insurance coverage also reported deteriorating access to care. Nearly three of 10 (29%) of those who were insured all year reported that they did not get the care they needed because of cost, up from 21 percent in 2001.^[22]

Problems accessing the health care system also are related to income, even among those with health coverage. Nearly two of five (39%) adults who were insured all year with household incomes less than $35,000 said that they did not get the care they needed over the last 12 months because of cost. Obtaining prescription drugs appeared to be a particular problem in this income group (Table 4). But even a quarter (24%) of people with coverage in higher income brackets reported that they did not get needed health care because of cost.

Medical Bills and Lingering Medical Debt Are Undermining the Financial Security of American Families

Out-of-pocket costs for health care are negatively affecting the finances of those who have gaps in coverage as well as those who are continuously insured. The Commonwealth Fund survey asked people about their ability to pay their medical bills in the last 12 months, including whether there were times when they had difficulty or were unable to pay their bills, whether they had been contacted by a collection agency concerning outstanding medical bills, or whether they had to change their lives significantly in order to meet their obligations. People who reported no medical bill problems in the last 12 months were asked if they were currently paying off medical debt that they had incurred in the last three years.

The survey found that 41 percent of adults under age 65 either had medical bill problems in the last 12 months or were paying off accrued medical debt (Chart 13). The problem was most severe among those who were uninsured at the time of the survey or had experienced a time uninsured in the past year (Chart 14). Women were more likely to say that they were coping with medical bills or debt than men-70 percent of uninsured women reported medical bill problems or accrued debt (Chart 15).

But even those adults who were insured continuously over the last 12 months cited problems. More than a third (35%) reported that they had experienced problems with medical bills or were paying off accrued debt (Table 4). Moreover, among those with bill problems or past debt, three of five (62%) said the bills were incurred for themselves or a family member who had been insured at the time.

Among those who had medical bill problems or outstanding debt, 27 percent reported that they had been unable to pay for basic necessities, including food, heat, or rent because of medical bills (Chart 16). Two of five (44%) said that they used all or most of their savings in order to meet their obligations. One-fifth reported that they had run up large debts on their credit cards or had taken out loans against their homes in order to pay their bills. People who were uninsured for a time and/or had low incomes were the most severely affected (Table 4). More than half (51%) of those earning less than $35,000 a year-regardless of insurance status-said that they had used all or most of their savings to pay their bills. Forty-five percent of those who were uninsured in that income category had been unable to pay for basic living necessities. 

Conclusion

The recent conflict between uninsured patients and hospitals over payment is a symptom of two underlying trends in the U.S. health care system: growing instability in health insurance coverage and rapid growth in health care costs. Health insurance has become both less available and more expensive to workers and their families, and health care itself continues to become more expensive. Indeed, health care cost growth is expected to outpace the growth rate in the economy by a wide margin for the foreseeable future.[23] Against this backdrop, patients, providers, employers, workers, labor unions, and federal, state and local governments are struggling to solve serious problems that stem from a far greater crisis. The practice of hospitals billing uninsured patients more than negotiated rates with insurers is troublesome and will only increase access and medical debt problems experienced by uninsured families.[24] And some hospitals' methods to attempt to recover medical debt from patients-charging high interest rates, having collection agencies harass them, and placing liens on their homes-are simply deplorable. Developing policies that would discourage hospitals from either practice is necessary. But in the meantime, the pressures that gave rise to this conflict will continue to grow apace. In the end, small policy changes will need to be accompanied by broad policy solutions that address the root cause of the affordability crisis in U.S. health care-policies that would expand access to affordable health insurance and reduce the rate of health care cost inflation. Thank you for the opportunity to be here today.