Understanding out-of-pocket spending


Most of us spend money out-of-pocket on our health care, whether it’s from co-insurance, a co-pay, or deductible. There is evidence that out-of-pocket spending is growing significantly for those with employer-sponsored insurance, due in part to rising deductibles. But there’s still a lot we don’t know about how people spend out-of-pocket and the impact on families.

In a new report from the JP Morgan Chase Institute, researchers looked at out-of-pocket spending from a financial security perspective, by using bank account data rather than hospital billing data. They created and analyzed a sample of two million de-identified bank accounts to find out who is spending out-of-pocket on health care, how much they are spending, and what they’re spending on most. Here’s what they found:

How much are we spending?

On average, the account holders in the sample spent $728, or 1.6% of their income, on out-of-pocket costs in 2016. Spending on out-of-pocket costs grew between 2013 and 2016, but remained stable as a proportion of income. However, it seems that high spending from the top 10% of health care skewed the average higher, because the typical (median) family only spent $276 on out-of-pocket spending.

What are we spending on most?

In 2016, spending on services at the doctor’s office were the most prevalent expenditure for families in the sample, with 52% of families paying out-of-pocket. But although fewer families paid out-of-pocket for dental, vision, and chiropractor services, they were fairly expensive. Average out-of-pocket spending for these three services was more than spending on doctors, drugs, and hospital payments combined. Many families lack insurance coverage for these services even though for most people, going to the dentist or getting new glasses is not optional. 

Who is spending out-of pocket?

While every age group and income group had some out-of-pocket spending, older, female, and lower-income account holders spent a larger proportion of their income on out-of-pocket health care costs on average. The authors also note that families generally paid out-of-pocket for care during the months and years when they had more available income. This makes financial sense, but it also means that families are delaying health care until they can afford it, which can be dangerous for their health. 

Source: JP Morgan Chase Institute, 2017

As hinted previously, there are some families that are hit particularly badly by high out-of-pocket expenses. The top ten percent spenders spent 9% of their income on out-of-pocket costs, about $3,500 on average. This small group accounted for 49% of all the out-of-pocket spending within the sample. Half these families are spent the same amount on out-of-pocket costs the next year as well, indicating that for some families, paying for health care is a long-term struggle. 

In recent years, there has been a greater effort to identify and understand patients with high need and multiple chronic conditions, who account for the bulk of health care spending. We should make a similar effort for this small group of patients who are spending a significant amount of their income, year after year, on health care out of pocket, to help keep them out of financial distress.





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