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CU study reveals a “Healthcare Divide”

Thursday, August 10, 2000

Consumers Union study reveals a “Healthcare Divide”
Despite U.S. prosperity, financial burden of healthcare weighs heavily on the sick, the middle class, and the poor

WASHINGTON, D.C. — Despite the unprecedented growth of the U.S. economy, the cost of healthcare continues to place an enormous burden on Americans who are seriously ill, as well as those who have moderate and low incomes.
According to Consumers Union, the nation is faced with a “healthcare divide,” a condition in which the financial burden of healthcare is much heavier for the sick, the middle class, and the poor than it is for the healthy and the wealthy.
The sickest 10 percent of Americans account for 68 percent of the money spent on healthcare each year, according to “The Healthcare Divide,” a national study by Consumers Union’s Washington DC office.
The study was written by Gail Shearer, Consumers Union’s Director of Health Policy Analysis, based on data compiled by the Lewin Group, a healthcare policy research firm.
“Our healthcare system is characterized by divisions,” said Ms. Shearer. “People with health insurance receive more care than the uninsured, who often cannot afford the care they need. Even among those with insurance, the healthy are divided from the sick, leaving the sick to shoulder large financial burdens. The burden of paying for healthcare divides people by income, with those at the lower income levels paying the largest share of income for healthcare. Until we overcome these divisions in our healthcare system, the goal of achieving affordable, universal healthcare coverage will continue to elude us.”
“The Healthcare Divide” finds that the sickest 10 percent of Americans pay seven times what the average American spends on healthcare.
The study also examines how much families have to budget for healthcare, taking into account what they spend on insurance premiums as well as out-of-pocket costs. It finds that:

  • Families with incomes of at least $100,000 spend 3 percent of their income on healthcare. Meanwhile, families making $45,000 spend 6 percent of their income on healthcare, and families making under $10,000 spend 17 percent on healthcare.

In other words:

  • Middle-income families spend twice the percentage of income that wealthy families spend on healthcare expenses; and
  • The poorest families spend six times the percentage of income that wealthy families spend on healthcare.

The study also finds that one in six households headed by a person under 65 spends 10 percent or more of family income on health insurance premiums and out-of-pocket costs. The burden increases dramatically with age, with one in every two households headed by a person over 65 spending more than 10 percent of family income on healthcare.
The private marketplace has failed to provide affordable healthcare to all Americans. Piecemeal attempts at reforming America’s healthcare system have not reduced the number of Americans without health insurance, which stands at 44 million people and rising. Nor have these incremental approaches addressed the problem of Americans who have health insurance, but not enough to cover their bills if they become seriously ill.
“When healthcare was the federal government’s major topic of debate in 1994, many of those who rejected the idea of providing comprehensive coverage argued that most of the system’s problems could be solved by the marketplace and smaller, limited initiatives,” said Ms. Shearer. “However, this Consumers Union report makes it clear that problems in our healthcare system are getting worse instead of better. The ‘healthcare divide’ has only become deeper in the last six years.”
Considering these findings and the fact that the federal government now has a budget surplus estimated at over $4 trillion, Consumers Union believes that it is time for Washington policymakers to renew discussions of establishing a system that provides universal health coverage.
“With its unprecedented budget surpluses, Congress should establish, as a matter of law, that all people in this country have a right to healthcare coverage — comprehensive, affordable, quality healthcare coverage,” said Ms. Shearer.
If policymakers are not willing to take a comprehensive approach, Consumers Union believes that they should address the needs of those who are most vulnerable in our society. Congress should pass a law to ensure that all children have comprehensive health coverage. It should approve a universal Medicare prescription drug plan. Medicare should be expanded to people between 55 and 64, and Medicaid and the State Children’s Health Insurance Program should be extended to the parents of the children enrolled in these programs.
Consumers Union also believes that Congress should reject proposals that perpetuate the failings of the marketplace, such as medical savings accounts (MSAs), healthmarts, and association health plans. While touted by some as ways to help more people get health insurance, these programs would eventually put health insurance out of reach for many Americans. These programs appeal mostly to people who are healthy and thus pull healthier people out of traditional insurance programs. As a result, those left with traditional health insurance would be forced to pay higher premiums. MSAs, health marts, and association health plans would only deepen the “healthcare divide.”
Consumers Union’s report “The Healthcare Divide” is available online in the Health section on this web site. To obtain a copy of the tables of healthcare expenditures compiled by the Lewin Group that serve as the basis of the study, contact Gail Shearer at (202) 462-6262.
For more information contact:
Gail Shearer, 202/462-6262