Metrics for Transformation –
Affordability of Health Care
The (Lack of) Affordability of Health Care
We all know health care costs have been rising, what seems like exponentially, year over year. A recent report released by the Commonwealth Fund quantified just how much health insurance premiums have increased from 2003 to 2011 in relation to the median household income. On average, premiums for family coverage have risen by 62% since 2003 and now account for roughly 20% or more of the average American family’s income, while deductibles have more than doubled.
A general rule of thumb, as expressed in a recent report by the Altarum Instituteii, is that total medical cost (premiums and out of pocket expenses) should not exceed 10% of family income. Above that limit, it is considered unaffordable, and the report highlights that 54% of middle class families in the US can no longer afford health insurance. That’s a staggering number that has tripled in 30 years: in 1981, only 15% of middle class families couldn’t afford health insurance.
Figure 1, below, summarizes the growth of average family premiums, highlighting the increase for employers and employees. The rate of increase, which has exceeded the consumer price index, is chiefly responsible for the stagnation of family incomes. Adjusted for inflation, average family incomes have decreased during the past decade. However, they would have increased if the rise in health care costs had been more moderate.
The net impact of the lack of affordability of health insurance is that it has crowded out other types of consumption by families. If 20% of a household budget is absorbed by health care, as opposed to 10%, then leisure-related expenses, or home improvement-related expenses, or other discretionary spending have been cut by 10%.
The bottom line is simple. Unless health care prices stop rising, very few US families will be able to afford health insurance in the future, non health care expenses will be cut even further, stifling economic recovery, and high labor costs will continue to make the US workforce less competitive.
What We Are Doing To Impact These Measures
All of HCI3’s activity is focused on making healthcare more affordable and higher quality, and we employ several strategies that are further delineated in the measures that fit underneath each of these top metrics. In addition to our work, it is the responsibility of every American to fight for the changes that are needed to reduce the current financial burden on families caused by health care expenses, and to reduce the gaps in quality that are causing thousands of Americans to die from health care related failures every year. To get involved, read The Incentive Cure.
- The Commonwealth Fund’s State Trends in Premiums and Deductibles, 2003-2011
- The Altarum Institute’s Center for Sustainable health Spending