Healthcare consumers are under increasing financial pressure. The consequences include rising annual out-of-pocket expenses, higher rates of underinsurance, and self-rationing of healthcare.

Financial Challenges for US Healthcare Consumers

According to the US Census, the population of the United States in 2021 stands at 331 million people. This figure, while impressive, also highlights a significant issue-approximately 30 million of these individuals are uninsured. A broad overview reveals that about half of the population is covered by Government health programs, as detailed below, while the other half are covered by private health insurance, specifically employer-sponsored health insurance ( ESI ).  It’s important to note that those enrolled in Government programs generally face far fewer financial challenges than those in private health insurance programs, who often have to contend with high deductibles, copayments, and out-of-pocket expenses.  For readers who are not interested in the analysis of the number of enrollees in different programs, the following sections may be skipped.

The adult population in the US is 256 million, while the population of children under 18 is 75 million. An important statistic is that approximately half (50%) of these children are covered by Government programs, specifically Medicaid and CHIP(Children’s Health Insurance Program). This comprehensive coverage under Government programs ensures that the majority of children, despite potential limitations in access, are well taken care of for their healthcare needs. Private Health Insurance covers 45% of the children, leaving only 5% uninsured.

Military healthcare, Tricare, and VA healthcare cover 8% of US adults(20 million)

Medicare covers 18% of the US population, primarily seniors over age 65 years. ( 55 million)

Medicaid covers 18% of the US population (55 million )

There is dual coverage -Medicare and Medicaid-for 5% of the US population ( 12 million)

Government programs ( Medicare, Medicaid, Military, and VA Health system), by and large, provide economic security to beneficiaries. 

Military and veteran health care is comprehensive and well covered with few or low deductibles and, deservedly so, for all the sacrifices made by our service men and women to protect our country and enhance our security. Despite bottlenecks in health care delivery in the VA health system, which result in delays and frustrations, the  VA program is enormously popular with veterans.  My encounters with several veteran patients during my practice years confirm the evidence provided in surveys of veterans. I should note that the VA system is a single-payer system akin to the British National Health Service. In the United Kingdom, the NHS has a high satisfaction rate in the general population despite long waiting periods for non-emergency procedures. So why is NHS in the UK and VA in the USA  popular? It concerns economic security and the simplicity of care without burdensome hassles; there is no fear of financial hardships and bankruptcy. To be sure there are waiting times for elective surgeries and procedures, but these frustrations do not diminish the popularity of this centralized single-provider care model. There is also a coordinated and integrated electronic health record system in the UK and the VA, making it easier  to manage chronic medical conditions.

Medicare, a healthcare program for seniors (over 65 years), is akin to the Canadian healthcare system- a single-payer (Government) and services provided by private healthcare professionals and private hospitals. Medicare covers a defined set of benefits at defined service rates much lower than in the private health insurance market. Medicare coverage limits the financial risk with ceilings on annual maximum out-of-pocket expenses incurred by the patients. Importantly, there is no lifetime limit as long as the patient receives Medicare-covered medically necessary care, providing security and peace of mind.
Surveys in Canada have shown satisfaction rates of 70% to 80% for their health system despite often publicized delays for elective surgeries and procedures. Medicare is also enormously popular in the USA, with many eagerly enrolling in Medicare Insurance once they reach their late 50s. Some of my affuent friends could not wait to enroll in Medicare from private health insurance or Obamacare insurance.

Medicare’s popularity is a beacon of economic security for seniors. It offers well-defined benefits at subsidized rates, with services provided by private healthcare providers and hospital systems. This provides a sense of relief, knowing that they can choose from a variety of different programs. The Inflation Reduction Act, passed by Congress in August 2022, further secures this relief by capping annual out-of-pocket drug costs to $2000.00 for 63 million Medicare enrollees.

The Medicare Advantage program is a comprehensive solution that is currently witnessing a significant increase in enrollment, with about 40%- 45% of the Medicare population opting for it. This program not only limits financial risk exposure for beneficiaries but also provides basic coverage for dental, vision, and hearing care, which traditional Medicare does not cover. This knowledge empowers beneficiaries to make informed decisions about their healthcare. 

Medicaid plays a pivotal role as the nation’s public health program, specifically designed to cater to Americans with low income. It serves as a crucial lifeline, providing essential healthcare services to those who might not be able to afford them otherwise.

Medicaid’s cost-effectiveness is evident in its substantially lower costs per beneficiary compared to private insurance. The program’s growth has seen slower per-beneficiary costs compared to private employer coverage, primarily due to reduced payments to providers and lower administrative costs.

Despite the hurdle of lower reimbursements to providers,  Medicaid remains a popular choice among beneficiaries. It provides economic security and prevents additional financial hardships from medical care, making it a preferred option despite the limited access to medical care.
Recent research has highlighted the significant benefits of enrolling in Medicaid or Medicare. A study by the Federal Reserve Bank of Chicago, the Universities of Illinois, the University of Michigan, and Northwestern University found that Medicaid expansion from the Affordable Care Act of 2010 led to a sharp drop in the number of unpaid bills and the amount of debt sent to third party collection agencies. Similarly, Americans in the age group 60-64 experience a dramatic reduction in debt collection  trauma once they turn 65 and go on Medicare.
Government programs such as Military, VA, Medicare, and Medicaid play a crucial role in providing economic security and reducing financial risk for beneficiaries. These programs, as we will see in the next section, offer a significantly lower exposure to financial risk compared to private health insurance. Some states did not expand Medicaid services initially. At the behest of providers, some states have expanded enrollment in recent years. Enrollees have embraced this expansion of coverage for those who did not qualify previously.

As of 2020, about 123.19 million were employed full-time workers, and 24.61 million were employed part-time workers in the U.S.

It’s worth noting that the job market is evolving, with about half of full-time employees now working for small businesses. Additionally, there’s a significant rise in the number of gig workers who are either unable to secure full-time jobs or unable to work because of poor health or social reasons.

Escalating healthcare costs are a cause for concern, not just for employers but also for employees. Top executives at nearly 90% of large employers foresee the cost of providing health benefits to employees becoming unsustainable in the next five to ten years. This situation is expected to necessitate government intervention to provide coverage and contain costs, a measure that will reduce financial pressures on employers and employees. 

Employer health plans are already paying much higher prices for healthcare goods and services than public plans. This disparity is a cause for concern, as hospitals nationwide charge much higher fees for employer-sponsored plan beneficiaries, and employers and private insurance companies are charged an average of 2.5 to 3 times the Medicare rates!

Rising expenditures in the PHI (Private Health Insurance) market are accompanied by rising premiums, deductibles, co-pays, co-insurance, and total annual out-of-pocket expenses. This places a significant burden on workers, as the following cost data gives a glimpse of the costs incurred by workers in different plans.

How much does group health insurance cost? In 2020, Kaiser Family Foundation (KFF) found the average premium for single coverage was $622.50 per month, or $7,470 per year. The average premium for family coverage was $1,778.50 per month or $21,342 per year. This data provides a glimpse of the significant financial burden that health insurance places on workers.

With the relentless surge in healthcare costs and premiums, employers are increasingly turning to high-deductible health plans. While this strategy reduces the health cost burden on employers, it significantly amplifies the financial strain on employees, as noted in the following report. This situation calls for urgent attention and action.

According to the McKinsey Consulting Group report on 09/16/2022, titled “The Gathering Storm: The Uncertain Future of Healthcare, “the following commentary underscores the challenges that employees and employers are likely to confront. This insight is crucial for preparing for the future.

Employers have continued to shift the cost of healthcare to employees.   In 2021, 40 percent of employees enrolled in high-deductible health plans. In addition, in 2019, the average family contribution to coverage was 32 percent for employees at companies with more than 500 workers and 53 percent for those with less than 499 workers. In a recent survey, 95 percent of employers stated that they would adjust benefits if cost increases were 4 percent or higher, with the most common changes being increasing employee cost sharing, shifting more and more to high-deductible health plans, and optimizing the provider network.

As noted above, consumers already face significant exposure to healthcare costs with the rising level of cost sharing in employer-sponsored insurance. 22 percent of consumers report having more than $1,000 of medical debt, 34 percent of those who chose to defer care stated it was due to lack of affordability, and 45 percent of consumers state that a $10 increase in the cost of a physician visit would lead them to avoid it. 

An  article in the New Yorker on 9/28/20 points out the dilemma for small employers employing low-wage workers: “Even before the pandemic, forty-five percent of working-age Americans either had no insurance or had insurance that carried deductibles and copays so high that they couldn’t afford medical care anyway.”

A company-sponsored insurance plan for a family adds an average of fifteen thousand dollars to the annual cost of employing a worker—effectively levying a fifty-per-cent tax on a fifteen-dollar-an-hour position.

Jamie Dimon (JP Morgan CEO) made the following observation in his annual shareholder (2021) report:
Dimon pointed out that nearly 30% of American workers make less than $15 an hour, which he added is “barely a living wage” for two adults working with two kids. On top of that, 30% of Americans lack the savings to deal with an unexpected expense of $400.
While a living wage differs by state, the national average is currently $68,000 yearly for a family of four. With two adults working full-time, each must earn $16.50 an hour to reach that level.
It is also evident that in employer-sponsored health plans,  there are increasing numbers of employees who are underinsured, as noted in the data outlined below from the Commonwealth Fund 2020 Biennial Health Insurance survey: In the first half of 2020, 43.4 percent of U.S. adults ages 19 to 64 did not have adequate coverage. As per Insurance experts, people whose annual out-of-pocket expenses ( not including insurance premiums)  are more than 10% of household income are considered underinsured.
The problem of underinsurance is  even worse in the Individual Marketplace
Although the ACA has decreased the overall uninsured rate, unfortunately, the underinsured rate has also increased.
According to eHealth,  33% of their customers chose a silver plan; the average monthly premium for an individual silver plan (30% patient/70% insurance on ACA Exchange was $418, with an average deductible of $2,758 for an individual in 2017. The average monthly premium for family plans was $1,061, with an average deductible of $5,424 in 2017.
47% of people chose the bronze plan ( 40% patient/60% Insurance), which was the most popular plan. So, practically speaking, the majority of Obamacare enrollees—excluding those enrolled in the Medicaid program—have prohibitive deductibles, coinsurance, copays, and annual out-of-pocket expenses. 
When compared with the average incomes of individuals and families, one can appreciate the financial responsibility faced by U.S. non-elderly adults for their healthcare needs.

Let me summarize the financial challenges faced by healthcare consumers in the USA, particularly in the Private Health Insurance market.
*Health care costs are almost twice as high compared to OECD countries.
*Health care costs are rising faster than OECD countries in the private employer-based health insurance market.
As a result of the escalating health care costs, employer-sponsored health plans are transferring more financial responsibility to employees for their health care. This shift is evident in the increasing deductibles, copayments, coinsurance payments, and annual out-of-pocket expenses that employees are now expected to cover.
Unsurprisingly, the increasing financial responsibility faced by employees has led to rising levels of health care underinsurance. This is a significant issue that needs to be addressed in the healthcare system.
There is, therefore, self-inflicted health care rationing by people. This means that individuals are forced to make difficult decisions about their healthcare, often choosing to forgo necessary treatments or medications due to the high costs. Unfortunately, this form of rationing leads to avoidance of necessary care, which can have serious implications for the individual’s health and well-being. 
*Where care is unavoidable, as in the case of medical emergencies, there is a rising incidence of financial bankruptcies when patients cannot pay their medical bills.