HEALTH CARE COSTS AND INSTABILITY OF INSURANCE: IMPACT ON PATIENTS’ EXPERIENCES WITH CARE AND MEDICAL BILLS Sara R. Collins, Ph.D. Senior Program Officer The Commonwealth Fund One East 75th Street New York, NY 10021 SRC@cmwf.org www.cmwf.org Invited testimony Subcommittee on Oversight and Investigations Committee on Energy and Commerce U.S. House of Representatives Hearing on “A Review of Hospital Billing and Collection Practices” June 24, 2004 Additional copies of this (#760) and other Commonwealth Fund publications are available online at www.cmwf.org. To learn about new Fund publications when they appear, visit the Fund’s website and register to receive e-mail alerts. EXECUTIVE SUMMARY 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. 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 associated with serious accidents and illnesses. The number of people without health insurance climbed to 43.6 million in 2002, nearly 4 million more than two years before. 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. Health insurance premiums rose even more rapidly, increasing by 13.9 percent in 2003, the third consecutive year of double-digit inflation. 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. A severe fiscal crisis has led many state governments to restrict eligibility for 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. 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. It also found evidence of an erosion in the quality of benefits received by 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. In addition, the survey found high rates of medical bill problems, among the insured and uninsured 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 include: • The share of working-age adults (ages 19 to 64) who experienced a time without insurance coverage increased to 26 percent in 2003, up from 24 percent in 2001, the last year the Commonwealth Fund survey was conducted. In 2003, 17 percent of adults said that they were uninsured at the time of the survey, while an additional 9 percent had coverage at the time of the survey but had been uninsured for part of the previous 12 months. • Insurance coverage was most unstable among those with the lowest incomes and among minorities. 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. 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. Nearly half (47%) of all Hispanics experienced a time uninsured, and coverage for African Americans worsened considerably— the share of those with a time uninsured rose from 27 percent in 2001 to 38 percent in 2003. 2 • In addition to eroding insurance coverage, the survey found evidence of a decline in the quality of coverage among those who are insured. Nearly half (49%) of those who were insured all year through private coverage said that they had experienced either an increase in the amount they pay for their premiums, an increase in their share of medical bills, or cutbacks or new limits in their health benefits. • Nearly everyone with private coverage pays something out-of-pocket when they obtain health care services. The survey asked adults how much they paid 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 adults (41%) with employer- sponsored coverage paid less than $500 annually in out-of-pocket costs; a third (36%) paid between $500 and $2,000 per year; 13 percent paid $2,000 or more per year; and 10 percent did not respond or did not know. People with coverage in the individual market paid more than those with employer sponsored coverage— 23 percent had 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. 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. • Erosion in insurance coverage appears to be impeding Americans’ ability to get health care. The share of people who reported problems getting the health care they needed because of cost increased from 29 percent in 2001 to 37 percent in 2003. Those problems included: not filling a prescription; having a medical problem but not going to a physician or clinic; skipping a medical test, treatment, or follow-up visit recommended by a doctor; or not seeing a specialist when a doctor or the respondent thought it was needed. • Access problems were most severe among those who experienced a period without health insurance in the previous 12 months. Around three of five of those who had a time uninsured said they had problems getting the care they needed because of cost. But even those with coverage all year reported problems. Three of 10 (29%) of those who were continuously insured reported that they did not get the care they needed because of cost, up from 21 percent in 2001. • Many Americans are having problems paying their medical bills. In the survey, two of five adults (41%) ages 19 to 64—more than 70 million people—said they had problems with their medical bills in the last 12 months or were paying off medical debt accrued over the last three years. Problems included: having difficulty paying or being unable to pay medical bills, being contacted by a 3 collection agency concerning outstanding medical bills, or being forced to make significant life changes in order to pay such bills. • Medical bill problems were most common among those who experienced a time uninsured, with around 60 percent reporting problems with bills or were paying off debt. But even those who were continuously insured cited problems—more than a third (35%) said that they had either a medical bill problem or were paying off debt over time. Individuals who were continuously insured and had incomes under $35,000 were particularly affected, with 45 percent of this group citing such problems. Moreover, among those with bill problems or past debt, nearly two- thirds (62%) said the bills had been incurred either for themselves or for a family member who had been insured at the time. • Medical bills are creating financial hardship among many families. Among those who said they had a medical bill problem in the last 12 months or were paying off accrued medical debt, more than a quarter (27%) reported that they had been unable to pay for basic necessities like food, heat, or rent because of medical bills. More than two of five (44%) said they had used all or most of their savings to pay their medical bills; one-fifth (20%) said that they had run up large credit card debts or had to take out loans against their homes in order to pay these bills. 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. 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 for uninsured families. 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. 4 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 1 R. Abelson and J.D. Glater, “Nonprofit Hospitals Said to Overcharge Uninsured,” New York Times, June 17, 2004; L. Lagnado, “Dunned for Old Bills, Poor Find Some Hospitals Never Forget,” The Wall Street Journal, June 8, 2004; C. Pryor et al., Unintended Consequences: How Federal Regulations and Hospital Policies Can Leave Patients in Debt (New York: The Commonwealth Fund, June 2003); C. Pryor and B. Seifert, Unintended Consequences: An Update on Consumer Medical Debt (New York: The Commonwealth Fund, June 2004). 2 R.J. Mills and S. Bandhari, Health Insurance Coverage in the United States: 2002, Current Population Reports (Washington, D.C.: U.S. Census Bureau, September 2003). 3 K. Levit et al., “Health Spending Rebound Continues in 2002,” Health Affairs 23 (January/February 2004): 147–59; K. Davis, Making Health Care Affordable for All Americans, Invited testimony before the Senate Committee on Health, Education, Labor, and Pensions hearing on “What’s Driving Health Care Costs and the Uninsured?” January 28, 2004. 4 J. Gabel et al., “Health Benefits in 2003: Premiums Reach Thirteen-Year High as Employers Adopt New Forms of Cost Sharing,” Health Affairs 22 (September/October 2003): 117–26. 5 J. Gabel et al.; S.R. Collins, C. Schoen, M.M.Doty, and A.L. Holmgren, Job-Based Health Insurance in the Balance: Employer Views of Coverage in the Workplace (New York: The Commonwealth Fund, March 2004). 6 M. Nathansan and L.Ku, Proposed State Medicaid Cuts Would Jeopardize Health Insurance Coverage for 1.7 Million People: An Update (Washington, D.C.: Center on Budget and Policy Priorities, March 21, 2003). 5 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 7 J. Hadley and J. Holahan, “How Much Medical Care Do the Uninsured Use, and Who Pays for It?” Health Affairs Web Exclusive (12 February 2003): W3-66–W3-81. 8 S.R. Collins et al., The Affordability Crisis in U.S. Health Care: Findings from the Commonwealth Fund Biennial Health Insurance Survey (New York: The Commonwealth Fund, March 2004). 9 Institute of Medicine, Hidden Costs, Value Lost: Uninsurance in America (Washington, D.C: National Academy Press, 2003). 10 K. Davis, Making Health Care Affordable for All Americans, Invited testimony before the Senate Committee on Health, Education, Labor, and Pensions hearing on “What’s Driving Health Care Costs and the Uninsured?, January 28, 2004. 11 S. Trude, Patient Cost-Sharing: How Much Is Too Much? Issue Brief No. 72 (Washington, D.C.: Center for Studying Health System Change, December 2003). 6 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. 12 Increase statistically significant at p < .05. 13 Increase statistically significant at p < .05. 14 Increase statistically significant at p < .05. 15 Increase statistically significant at p < .05. 7 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 16 P.F. Short and D.R. Graefe, “Battery-Powered Health Insurance? Stability in Coverage of the Uninsured,” Health Affairs 22 (November/December 2003): 244–55; P.F. Short, D.R. Graefe, and C. Schoen, Churn, Churn, Churn: How Instability of Health Insurance Shapes America’s Uninsured Problem (New York: The Commonwealth Fund, November 2003). 17 M.M. Doty and A.L. Holmgren, Unequal Access: Insurance Instability Among Low-Income Workers and Minorities (New York: The Commonwealth Fund, April 2004). 18 S.R. Collins, C. Schoen, M.M. Doty, and A.L. Holmgren, Job-Based Health Insurance in the Balance: Employer Views of Coverage in the Workplace (New York: The Commonwealth Fund, March 2004). 19 S.R. Collins, C. Schoen, K. Tenney, M.M. Doty, and A. Ho, Rite of Passage? Why Young Adults Become Uninsured and How New Policies Can Help (New York: The Commonwealth Fund, May 2004). 8 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%) 20 J. Gabel and J.D. Pickreign, Risky Business: When Mom and Pop Buy Health Insurance for Their Employees (New York: The Commonwealth Fund, April 2004). 21 S. Glied, J.M. Lambrew, and S. Little, The Growing Share of Uninsured Workers Employed by Large Firms (New York: The Commonwealth Fund, October 2003). 9 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- 10 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 11 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 22 Increase statistically significant at p < .05. 12 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 13 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. 23 B.C. Strunk and P.B. Ginsburg, “Tracking Health Care Costs: Trends Turn Downward in 2003,” Health Affairs Web Exclusive (9 June 2004): W4-354–W4-362. 24 R. Abelson and J.D. Glater, “Nonprofit Hospitals Said to Overcharge Uninsured,” New York Times, June 17, 2004; L. Lagnado, “Dunned for Old Bills, Poor Find Some Hospitals Never Forget,” The Wall Street Journal, June 8, 2004; C. Pryor et al., Unintended Consequences: How Federal Regulations and Hospital Policies Can Leave Patients in Debt (New York: The Commonwealth Fund, June 2003); C. Pryor and B. Seifert, Unintended Consequences: An Update on Consumer Medical Debt (New York: The Commonwealth Fund, June 2004). 14 THE COMMONWEALTH FUND Health Care Costs and Instability of Insurance: Impact on Patients’ Experiences with Care and Medical Bills Sara R. Collins, Ph.D. Senior Program Officer, The Commonwealth Fund June 24, 2004 Hearing on “A Review of Hospital Billing and Collection Practices” U.S. House of Representatives Committee on Energy and Commerce Subcommittee on Oversight and Investigations Chart 1 Uninsured Up by Nearly 4 Million People in Past Two Years Millions uninsured, 1987–2002 60 41.7 43.6 39.7 40.2 39.8 41.2 40 34.7 31 20 0 1987 1990 1993 1996 1999 2000 2001 2002 Source: U.S. Census Bureau, March CPS Surveys March 1988 to March 2003. Years 1999 and on adjust for new question and for 2000 population weights. 15 National Health Expenditures’ Chart 2 Average Annual Percentage Growth, Selected Calendar Years, 1960–2004 Percent 15 12.9 10.6 11.0 9.7 9.3 10 8.5 7.8 7.2 6.2 5.3 5 0 1960– 1970– 1980– 1990– 1993– 1997– 2000– 2001– 2002– 2003– 1970 1980 1990 1993 1997 2000 2001 2002 2003 2004 Projected Source: The Commonwealth Fund, based on K. Levit et al., “Health Care Spending Rebound Continues in 2002,” Health Affairs 23 (Jan./Feb. 2004): 147–59; and S. Heffler et al., “Health Spending Projections Through 2013,” Health Affairs Web Exclusive (11 Feb. 2004): W4-79–W4-93. Chart 3 Growth in Employment-Based Insurance Premiums Percent change in health insurance premiums and workers’ earnings from previous year 18% Premiums Worker's Earnings 14% 12% 13% 11% 9% 9% 5% 3% 3% 1% 0% 1988 1993 1996 1999 2001 2002 2003 Source: J. Gabel et al., “Health Benefits in 2003: Premiums Reach Thirteen Year High as Employers Adopt New Forms of Cost Sharing,” Health Affairs (Sept./Oct. 2003): 117–26. 16 Chart 4 Percent of Employers with Increases in Cost-Sharing, Reductions in Benefits Percent of firms offering coverage 40 33 31 25 18 20 15 0 Increased Increased Raised Eliminated or Offset premium employee employee deductibles placed limits increases with copayments or shares of on benefits lower wage coinsurance premiums increases Source: S.R. Collins et al., Job-Based Health Insurance in the Balance: Employer Views of Coverage in the Workplace (New York: The Commonwealth Fund, March 2004). More than One-Quarter of Adults Chart 5 Uninsured: Rates Highest Among Adults with Low Incomes, 2001–2003 Percent of adults ages 19–64 75 Insured now, time uninsured in past year Uninsured now 52 49 50 15 16 35 28 24 26 11 25 11 9 9 16 33 37 13 24 7 9 4 4 15 17 17 6 7 1 3 2 2 0 2001 2003 2001 2003 2001 2003 2001 2003 2001 2003 Total Less than $20,000– $35,000– $60,000 $20,000 $34,999 $59,999 or more Note: Income groups based on 2002 household income. Source: The Commonwealth Fund Health Insurance Surveys (2001 and 2003). 17 Chart 6 Uninsured Rates Highest Among Hispanics and African Americans, 2001–2003 Percent of adults ages 19–64 75 Insured now, time uninsured in past year Uninsured now 45 47 50 10 38 12 26 27 15 24 25 19 21 9 9 13 37 8 33 8 23 15 17 14 13 11 0 2001 2003 2001 2003 2001 2003 2001 2003 Total Hispanic African White American Source: The Commonwealth Fund Health Insurance Surveys (2001 and 2003). Chart 7 Percent of Graduates with Gaps in Insurance Coverage in Year Following Graduation, by Student Status 1996–2000* Percent Any time uninsured 60 51 6 months or more uninsured 38 31 30 23 21 13 0 High School Graduates High School Graduates College Graduates Who DID NOT Go to Who Enrolled in College College * People who graduated from high school or college during 1996–2000. Source: S.R. Collins et al., Rite of Passage? Why Young Adults Become Uninsured and How New Policies Can Help (New York: The Commonwealth Fund, May 2004). 18 Chart 8 Share of Uninsured Workers by Firm Size, 1987−2001 Large (500+) Medium (100–499) Percent Small (<100) 100 25 32 80 14 60 12 40 61 57 20 0 1987 2001 Source: S. Glied, J.M. Lambrew, and S. Little, The Growing Share of Uninsured Workers Employed by Large Firms (New York: The Commonwealth Fund, October 2003). Chart 9 Nearly Half of Adults with Private Health Insurance Report Erosions in Their Benefits Percent of adults 19–64 with continuous coverage throughout past year 75 49 50 43 28 21 25 0 Premium Benefits cut Share of medical Any of the three increased*† bills increased* erosions in quality of benefits * Increased a lot or a moderate amount. † Among those who pay any premium. Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). 19 Chart 10 Adults with Low and Moderate Incomes Spend Greatest Share of Income on Out-of-Pocket Costs Percent of adults ages 19–64 insured all year with private insurance 75 Spent 5% or more of income on out-of-pocket costs Spent 10% or more of income on out-of-pocket costs 50 29 23 25 17 11 12 10 5 2 2 1 0 Total Less than $20,000– $35,000– $60,000 or $20,000 $34,999 $59,999 more Note: Income groups based on 2002 household income. Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). Chart 11 Cost-Related Access Problems Have Increased, 2001–2003 Percent of adults ages 19–64 who had any of four access problems* in past year because of cost 2001 2003 75 61 55 57 52 50 37 29 29 21 25 0 Total Uninsured now Insured now, time Insured all year uninsured in past year * Did not fill a prescription; did not see a specialist when needed; skipped recommended medical test, treatment, or follow-up; had a medical problem but did not visit doctor or clinic. Source: The Commonwealth Fund Health Insurance Surveys (2001 and 2003). 20 Chart 12 Lacking Health Insurance for Any Period Threatens Access to Care Percent of adults ages 19–64 reporting the following problems because of cost: Uninsured now Insured now, time uninsured in past year Insured all year 75 61 57 51 50 37 40 40 39 35 27 29 25 18 18 9 12 13 0 Did not fill a Did not see Skipped Had medical Any of the four prescription specialist when medical test, problem, did access needed treatment, or not see doctor problems follow-up or clinic Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). Chart 13 Two of Five Adults Have Medical Bill Problems or Accrued Medical Debt:* Uninsured and Low Income Most at Risk Percent of adults ages 19–64 with any medical bill problem or outstanding debt All Uninsured Continuously insured 75 60 62 57 53 50 45 41 35 32 29 25 0 Total Income less than $35,000 Income $35,000 or more * Problems paying/not able to pay medical bills, contacted by a collection agency for medical bills, had to change way of life to pay bills, or has medical debt being paid off over time. Note: Income groups based on 2002 household income. Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). 21 Chart 14 Adults with Any Time Uninsured Have High Rates of Medical Bill Problems Percent of adults ages 19–64 who had the following problems in past year: Uninsured now Insured now, time uninsured in past year Insured all year 75 59 62 50 44 44 35 36 35 28 26 25 16 15 10 6 7 10 0 Not able to pay Contacted by Had to change Medical bills/ Any medical bill medical bills collection way of life to debt being paid problem or agency pay medical off over time outstanding bills debt Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). Chart 15 Half of Adult Women Have Medical Bill Problems or Accrued Medical Debt,* Uninsured at Highest Risk Percent of adults ages 19–64 with any medical bill problem or outstanding debt 80 Women Men 70 60 50 49 43 40 32 26 20 0 Total Uninsured Insured Continuously * Problems paying/not able to pay medical bills, contacted by a collection agency for medical bills, had to change way of life to pay bills, or has medical debt being paid off over time. Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). 22 Chart 16 More than Two of Five Adults with Medical Bill Burdens Used All or Most of Their Savings on Medical Bills Percent of adults ages 19–64 with medical bill problems or accrued medical debt: Insured now, Uninsured Insured all Percent of adults reporting: Total time uninsured now year during year Unable to pay for basic necessities, such as 27% 39% 41% 18% food, heat, or rent Used all or most of 44 53 46 39 savings Had large credit card debt, or had to take 20 21 30 18 loan against home Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). 23 Table 1. Changes in Health Benefits Among Insured Adults, 2003 (base: adults ages 19–64, insured all year with private insurance) Income Distribution* Insurance Source (base: employer-based insurance) Less Total than $20,000– $35,000– $60,000 Private Employer Individual $20,000 $34,999 $59,999 or more Total in Millions (estimated) 108.4 100.8 7.6 9.7 13.6 30.8 36.3 Changes in Health Benefits in Past Year Cuts in benefits Yes 21% 22% 14% 14% 14% 22% 27% No 75 75 84 77 81 75 70 Increases in paying share of medical bills None 56 55 66 61 67 54 48 Increased a lot 9 9 14 8 8 8 9 Increased a moderate amount 19 20 13 13 11 21 25 Increased only a little 15 16 6 17 13 15 18 Premium increases (base: respondents reporting paying any premiums) None 40 42 27 47 48 43 37 Increased a lot 19 18 34 19 15 15 21 Increased a moderate amount 24 24 24 21 21 22 25 Increased only a little 13 13 7 10 13 13 14 One or more of the above changes 49 48 61 36 38 47 56 in health benefits** Note: Columns may not sum to 100% because of rounding and because “Don’t know/Refused to answer” not shown. * Among respondents reporting income. ** Respondents whose premiums increased a lot or a moderate amount, had cuts in benefits, or whose share of medical bills increased a lot or a moderate amount. Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). 24 Table 2. Annual Deductibles and Insurance Premiums, 2003 (base: adults ages 19–64, insured by private insurance when surveyed) Current Insurance Source Deductibles and Insurance Premiums by Plan Type Total Private Employer Individual Total in Millions (estimated) 119.0 109.8 9.2 Annual Deductible Per Person No deductible 34% 35% 25% Less than $100 6 7 6 $100–$499 27 28 11 $500–$999 10 10 14 $1,000 or more 7 5 30 Undesignated 15 15 15 Annual Premium Costs Type of Plan Single/Individual Plan 38 36 57 Family Plan 59 61 40 Single/Individual Plan None 22 24 8 $1–$499 10 10 12 $500–$999 18 20 9 $1,000–$1,499 15 15 13 $1,500–$2,499 9 8 13 $2,500 or more 13 10 34 Undesignated 13 13 12 Spent 5% or more of income 20 16 52 Spent 10% or more of income 7 5 26 Family Plan None 19 20 4 $1–$499 5 6 0 $500–$999 7 7 4 $1,000–$1,499 12 12 7 $1,500–$2,499 13 14 5 $2,500 or more 28 26 65 Undesignated 15 15 14 Spent 5% or more of income 19 18 36 Spent 10% or more of income 5 5 13 Note: Columns may not sum to 100% because of rounding. Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). 25 Table 3. Individual Out-of-Pocket Costs Among Uninsured, Insured, and Low-Income Adults, 2003 (base: adults ages 19–64) Continuity of Insurance Continuously Insured* Insured Total Now, Time Adults Uninsured Uninsured in Continuously 19–64 Now Past Year Insured Employer Individual Public Total Individual Out-of-Pocket Costs in Past 12 Months None 12% 23% 14% 10% 6% 6% 31% $1–$499 33 27 37 34 35 23 34 $500–$999 18 16 12 19 21 23 7 $1,000–$1,999 13 10 8 14 15 15 8 $2,000 or more 14 17 16 13 13 23 9 Undesignated 10 7 12 10 10 10 11 Spent 5% or more of income 17 33 23 12 10 18 22 Spent 10% or more of income 9 18 14 6 4 10 15 INCOME BELOW 200% POVERTY Total in Millions 59.4 20.5 8.7 30.2 16.6 1.9 9.7 Total Individual Out-of-Pocket Costs in Past 12 Months None 19 23 16 17 8 14 30 $1–$499 34 28 40 37 40 37 37 $500–$999 14 16 12 13 17 11 7 $1,000–$1,999 9 9 8 10 11 8 9 $2,000 or more 14 18 13 12 13 20 7 Undesignated 9 6 11 11 11 10 10 Spent 5% or more of income 29 35 26 25 26 42 19 Spent 10% or more of income 17 20 19 14 15 23 12 * “Other” insurance category (including military or veteran’s coverage) not shown. Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). 26 Table 4. Access Barriers and Medical Bill Burdens by Insurance and Income, 2003 (base: adults ages 19–64) All Adults 19–64 Income Less than $35,000 Income $35,000 or More Insured Now, Total Continuously Time Uninsured Uninsured Continuously Continuously Access and Cost Indicators Insured in Past Year Now Insured Uninsured Insured Uninsured Total in Millions (estimated) 171.9 126.5 15.6 29.8 40.0 33.8 77.7 8.7 Percent Distribution: — 74% 9% 17% 34% 80% 66% 20% Access Problems in Past Year Went without needed care in past year due to costs: Did not fill prescription 23 18 40 37 25 38 15 40 Did not get needed specialist care 13 9 18 27 13 24 7 24 Skipped recommended test or follow-up 19 12 35 40 17 38 10 42 Had a medical problem, did not visit doctor or clinic 22 13 39 51 20 50 10 39 At least one of four access problems due to inability to pay 37 29 57 61 39 61 24 58 Would have received better care if had been insured or 38 30 58 61 34 61 28 53 had different insurance plan Medical Bill Problems in Past Year Problems paying or not able to pay medical bills 23 16 44 44 26 46 11 40 Contacted by a collection agency for medical bills 21 15 36 35 23 37 12 33 Had to change way of life to pay bills 15 10 26 28 19 29 6 25 Any bill problem 32 25 55 53 37 56 19 49 Medical bills/debt being paid off over time 9 10 7 6 8 6 11 8 Base: Any bill problem or medical debt 41 35 62 59 45 62 29 57 Percent reporting that: Unable to pay for basic necessities (food, heat, or rent) 27 18 41 39 29 45 11 24 Used all or most of savings 44 39 46 53 51 51 30 52 Had large credit card debt/ 20 18 30 21 19 24 17 27 Needed loan or debt against home Insurance status of person/s at time care was provided Insured at time care was provided 62 83 42 20 74 24 92 41 Uninsured at time care was provided 32 11 52 73 17 69 5 52 Other insurance combination 3 2 4 4 2 4 2 2 Source: The Commonwealth Fund Biennial Health Insurance Survey (2003).