Health Care Costs and Instability of Insurance: Impact on Patients' Experiences with Care and Medical Bills

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.
• 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 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 unacceptable 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.