By Deneece Ferrales
Over 90% of the United States population has some form of health insurance, according to the Peterson-KFF Health System Tracker. The number of uninsured has dropped from 16% in 2010 to just under 10% in 2022.
While increasing the number of people with health insurance is certainly a reason for optimism, medical debt remains a persistent problem. Families with limited resources are often unable to pay the medical copays expected at the time of service or the deductible amounts afterward. Also, those who do pay worry about having enough money for food, lodging, power, and other needed services.
The situation may be compounded for people diagnosed with chronic illness or other significant medical needs because costs can skyrocket and/or extend over a significant time.
Traditionally, the fee-for-service method of medical insurance billing has included consumer cost-sharing in the form of deductibles, copayments, and coinsurance. Because the patient shares the burden of cost for medical care, the patient is motivated to shop for lower-cost options when they need care, benefitting the insurance company.
The problem, however, is that cost-sharing has increased over time. According to the Peterson-KFF Health System Tracker, the average deductibles for employer-based coverage for a single health need was $2,379 for covered workers at small companies and $1,397 for workers at larger companies. This can be problematic as households do not have expendable, liquid assets to cover these deductibles.
The Survey of Consumer Finances examined household finances, including debts, assets, income, and health insurance. The analysis looked at households not headed by an elderly person and focused on liquid financial assets — money that families can liquidate and use in a relatively short period of time. The analysis showed that the average liquid assets of a single-person household was $2,977 and the average liquid assets of a multi-person household was $6,704. The maximum out-of-pocket limit for single-person households was $7,900 and for multi-person households was $15,800.
The survey reveals a disconnect between medical costs and ability to pay even among those who are insured. Insurance out-of-pocket maximums for a single person are almost $5,000 more than the average amount a single person can afford, according to the survey. For families, the difference is almost $8,000.
The out-of-pocket figure ($6,704) for families was determined by averaging a wide range of salaries. Therefore, the affordability gap is even wider when thinking specifically about low to middle income working families.
So how are working families able to meet their deductibles? It is almost impossible to do so. Many families choose to skip seeking medical treatment. Waco/McLennan County has an adequate number of primary care physicians, according to City Health Data, but more than 25% or one-fourth of all city/county residents have not seen a primary care physician in the last year.
The high cost of deductibles may stop many residents from seeking ongoing medical treatment. This, in turn, actually costs the individual or family more money in the future as certain illnesses or conditions may become worse over time with no treatment or monitoring. Further, when medical treatment is sought, the medical needs have become so great that many people are forced to file for bankruptcy due to high medical bills. According to the National Library of Medicine, 40% of all bankruptcies are due to medical bills.
Healthcare is a basic need for human existence. The disconnect between the cost of deductibles and copays and the ability for individuals and families to meet those needs can prevent a family from seeking and receiving quality and equitable healthcare.
Is there a solution?
There are some alternative ways of insurance payments, such as value-based care, which focuses on the quality of care. Providers are paid based on healthcare outcomes rather than by fee-for-service. This reduces the prescribing of unnecessary tests and focuses on disease management and prevention. Medicare and Medicaid have slowly moved toward the implementation of value-based care nationwide for the past 10 years.
Gap insurance to meet deductibles has also gained in popularity. This allows families to have assistance paying medical bills before the annual deductible is met. It is “insurance on insurance.” The problem with this solution is that the family must pay an additional amount monthly to maintain the gap insurance, thus raising their out-of-pocket cost for insurance premiums.
There are a number of other models and solutions, such as moving from a sick-care system to a health care system, developing tax credits for a range of wellness activities (i.e. smoking cessation, weight loss, etc.), and creating healthcare taxing districts.
Whatever solution or solutions are chosen, it is long past time for making equitable healthcare affordable. The affordability of healthcare and medical debt is no longer a conversation that focuses on the indigent, uninsured, and underinsured, but a conversation that needs to take a broader focus as fewer and fewer individuals and families are able to afford to obtain medical care.
Deneece Ferrales, Ph.D., is director of health initiatives for Prosper Waco.