Rising Health Costs, Medical Debt and Chronic Conditions

The Financial Burden of Chronic Conditions

The high and rising cost of health care creates financial problems for many Americans, but people living with chronic conditions -- diabetes, asthma, depression, and similar ongoing illnesses -- are especially vulnerable to difficulties paying medical bills. Because chronic conditions often require continuous medical attention, the people who live with them tend to face higher out-of-pocket spending on care. By conservative estimates, roughly 57.3 million working-age Americans, representing 33 percent of the working-age population, had at least one chronic condition according to HSC's 2003 Community Tracking Study (CTS) Household Survey.

Among working-age people with chronic conditions, more than one in five -- about 12.3 million people -- lived in families that reported problems paying medical bills in the prior year. These problems were most severe for the 6.6 million uninsured people living with chronic conditions, with close to half of them reporting medical bill difficulties. Among the roughly 3 million uninsured, chronically ill people whose families had medical bill problems, 42 percent went without needed care, 65 percent delayed care, and 71 percent failed to get needed prescription drugs, all because of cost concerns.

While uninsured working-age adults with chronic conditions were most likely to have trouble paying for and accessing care, many insured people faced problems too. In fact, a majority of chronically ill working-age adults who reported high health care costs and access problems were covered by private insurance. Even for insured individuals, low incomes -- defined as family income below 200 percent of the federal poverty level, or $36,800 for a family of four in 2003 -- substantially increased the likelihood of medical bill problems.

Between 2001 and 2003, the share of low-income, chronically ill people with private insurance who spent more than 5 percent of their income on out-of-pocket health care costs jumped from 28 percent to 42 percent -- a 50 percent increase affecting 2.2 million people.

People with Chronic Conditions Face Higher Out-of-Pocket Costs

People with chronic conditions were more likely to spend a greater share of their income on out-of-pocket medical costs. Across the entire working-age population in 2003, 12 percent reported family out-of-pocket health costs exceeding 5 percent of family income. Among only working-age adults with chronic conditions, that figure was 19 percent.

In 2003, 38 percent of low-income chronically ill people had out-of-pocket health costs greater than 5 percent of family income, compared with just 8 percent of chronically ill people with family incomes above 400 percent of poverty. Insurance coverage also made a major difference: 35 percent of all uninsured chronically ill people reported health costs exceeding 5 percent of income, compared with 13 percent of their privately insured counterparts. However, that 13 percent translated into 5.1 million privately insured people with chronic conditions whose health costs surpassed the 5 percent threshold -- more than twice the 2.2 million uninsured people at the same spending level.

Between 2001 and 2003, the proportion of people with high out-of-pocket costs relative to income increased overall. The increase occurred almost entirely within the privately insured group and was most pronounced for low-income people. The share of low-income, privately insured, chronically ill people with out-of-pocket costs exceeding 5 percent of family income rose from 28 percent in 2001 to 42 percent in 2003. This change likely reflected the effects of increased patient cost sharing for insured individuals, combined with health care costs rising much faster than incomes. By 2003, low-income chronically ill people with private insurance had become just as likely as their low-income uninsured counterparts to spend at least 5 percent of income on health care.

Low Incomes and Lack of Insurance Drive Medical Bill Problems

Working-age adults with chronic conditions were more than twice as likely as healthy working-age adults to live in families that had trouble paying medical bills in the prior year -- 21 percent compared with 10 percent. Among low-income people with chronic conditions, 35 percent lived in families with medical bill problems.

Uninsured people with chronic conditions were particularly vulnerable: almost half (45 percent, or 3 million people) were in families with such problems. But even people covered by private insurance were not immune. One in six privately insured people with chronic conditions (16 percent, or 6.4 million people) lived in families with medical bill problems. Among those who were privately insured but low income, 35 percent -- nearly 2 million people -- had family medical bill problems. While this rate was lower than the 48 percent for uninsured, low-income adults with chronic conditions, it underscored the limitations of health insurance alone in shielding people from the high costs of treating chronic illness.

Large Medical Bills Linked to Family Finance and Access Problems

Among working-age adults with chronic conditions whose families had problems paying medical bills, the negative effects on other aspects of family finances were common and severe. Sixty-eight percent of their families had trouble paying for other necessities like food and shelter. Sixty-four percent were contacted by a collection agency. Fifty-five percent put off major purchases. And 50 percent had to borrow money. More than nine in ten families with medical bill problems faced at least one of these consequences, and almost a quarter experienced all four.

Medical bill problems also had serious consequences for access to medical care. People with chronic conditions whose families had medical bill problems were four to five times as likely to forgo or delay care because of cost concerns as those whose families reported no such problems. Among chronically ill people whose families had trouble paying medical bills, 19 percent (2.4 million people) went without needed care, 38 percent (4.7 million people) delayed care, and 53 percent (6.6 million people) failed to get needed prescription drugs because of cost concerns.

Access problems were most acute for the uninsured. Among uninsured people with chronic conditions and family problems with medical bills, 42 percent went without care, 65 percent delayed care, and 71 percent did not fill a prescription because of cost concerns. Rates of access problems for the privately insured with medical bill problems, while lower, were still substantial: 10 percent went without care, 30 percent delayed care, and 43 percent did not fill a prescription because of cost. These results suggested that once families had trouble paying medical bills, the worry about accumulating more bills and further straining family finances caused many people with chronic conditions to cut back on needed medical services.

Implications for Policy and Practice

That people with chronic conditions bore higher out-of-pocket cost burdens than other adults was hardly surprising. But the extent of that burden and the degree to which it impeded timely access to medical care were cause for concern. Failure to receive preventive and ongoing care for chronic conditions can result in serious health consequences for patients.

The uninsured chronically ill -- who were mostly low income -- bore the heaviest out-of-pocket cost burden and frequently went without needed care. Affordable insurance coverage would give this vulnerable group a measure of financial protection and help narrow very large access gaps. Without insurance, people with chronic conditions who needed medical care had to shoulder high and rising costs on their own or rely on a patchwork of charity care. Increased funding for community health centers had helped improve primary care access for low-income and uninsured people, but access varied widely across communities. And even where safety nets were strong, access to specialty services and prescription drugs -- both critical for many people with chronic conditions -- continued to present major problems.

The financial burden borne by Americans living with chronic conditions seemed likely to increase in the future. The number of uninsured people was growing, health care costs were rising more rapidly than incomes, and many employers continued to increase patient cost sharing through higher deductibles, copayments, and coinsurance arrangements where patients paid a percentage of the bill instead of a fixed-dollar copayment.

Research had found that doubling a drug copayment from $10 to $20 triggered substantial cutbacks in the use of important prescription drugs, including those used to treat diabetes and high cholesterol. Conversely, an employer experiment that reduced employee copayments for diabetes and asthma medications resulted in fewer emergency room visits and hospital stays for those conditions. Such results may encourage employers and insurers to explore what one insurer called evidence-based copays, where copayments would be reduced or waived for clinically valuable and cost-effective treatments.

Another cost-sharing refinement that could give financial relief to low-income workers was varying cost-sharing levels according to income. Some employers already tied premium contribution levels to income; the approach could be extended to patient cost sharing by varying either deductibles or out-of-pocket maximums. Many chronically ill people faced with high out-of-pocket costs may find little appeal in insurance options emphasizing broad provider choice but demanding greater financial risk, such as high deductibles. For many in this population, options that restricted choice of providers in exchange for lower out-of-pocket expenses may prove a better fit.

CTS data showed a majority of Americans with chronic conditions being willing to give up provider choice to save on out-of-pocket costs, and the lower a person's income, the stronger the willingness to make this tradeoff. Traditional closed-network health plans, which had fallen out of favor in recent years, may have merited a second look for the relatively low out-of-pocket costs they offered. Tiered-provider networks, which had yet to be widely adopted, may have provided another cost-saving option for patients willing to limit their choice of doctors and hospitals.

Sources and Further Reading

This Issue Brief (No. 88, September 2004) was authored by Ha T. Tu and published by the Center for Studying Health System Change (HSC). The findings were based on analysis of the 2003 CTS Household Survey, a nationally representative survey involving about 24,500 families and 46,600 people, including 31,935 working-age adults. The survey asked respondents whether they had been diagnosed with one or more of over 10 chronic conditions, including asthma, arthritis, diabetes, COPD, heart disease, hypertension, cancer, benign prostate enlargement, abnormal uterine bleeding, and depression.

May, Jessica H. and Peter J. Cunningham. Tough Trade-offs: Medical Bills, Family Finances and Access to Care. Issue Brief No. 85, Center for Studying Health System Change (June 2004). Hwang, Wenke, et al. "Out-of-Pocket Medical Spending for Care of Chronic Conditions." Health Affairs, Vol. 20, No. 6 (November/December 2001). Goldman, Dana P., et al. "Pharmacy Benefits and the Use of Drugs by the Chronically Ill." Journal of the American Medical Association, Vol. 291, No. 19 (May 12, 2004).

Centers for Medicare and Medicaid Services — Federal agency overseeing Medicare, Medicaid and related programs.

KFF (Kaiser Family Foundation) — Health policy research and data on insurance coverage and costs.

Commonwealth Fund — Research on health care costs, access, and chronic disease management.