Healthcare Costs: Insured, Yet Unaffordable

Despite the number of insured people in the US reaching record highs during the COVID-19 pandemic, many Americans still face substantial out-of-pocket expenses and limited financial protection. In 2021, nearly 299 million Americans had health insurance, but this still left just over 28 million uninsured.

A survey by the Commonwealth Fund found that 43% of working-age adults were inadequately insured. This means they were either uninsured (9%), had a gap in coverage over the previous year (11%), or were insured all year but were underinsured (23%), with coverage that didn't provide affordable access to healthcare.

The high cost of healthcare is a burden on US families, with about half of US adults saying it is difficult to afford healthcare costs. This includes insured as well as uninsured people, and is particularly true for those with lower incomes. The cost of healthcare can lead people to put off needed care, with one in four adults saying they have skipped or postponed treatment in the past year because of the cost.

Healthcare debt is a burden for a large share of Americans, with about four in ten adults reporting debt due to medical or dental bills. This includes disproportionate shares of Black and Hispanic adults, women, parents, those with low incomes, and the uninsured.

High out-of-pocket expenses

The Affordable Care Act (ACA) has helped reduce the risk of very high out-of-pocket health care costs for most Americans. However, high out-of-pocket spending continues to affect a small percentage of Americans, particularly those with employer coverage and incomes above 400% of the federal poverty level. In 2017, one in 100 Americans under the age of 64 spent $5,000 or more out of pocket on medical services, while about one in 20 spent more than $1,700. High deductibles and out-of-pocket maximums in private insurance plans, combined with unexpected out-of-network bills, can result in significant financial burdens for individuals and families.

The impact of high out-of-pocket expenses is not limited to the financial domain. Research has linked high costs to poor medication adherence and treatment delays for patients with chronic diseases such as rheumatoid arthritis, kidney disease, and cancer. Additionally, individuals without insurance coverage have lower access to care and are more likely to delay or forgo treatment due to costs.

To address the challenge of high out-of-pocket expenses, some individuals opt for high-deductible health plans (HDHPs) with health savings accounts (HSAs). While HDHPs offer lower monthly premiums, they can lead to substantial out-of-pocket expenses if unexpected or extensive medical care is required.

The burden of high out-of-pocket expenses falls disproportionately on specific demographic groups. For example, racial and ethnic disparities persist, with nonelderly Hispanic and American Indian/Alaska Native individuals being more than 2.5 times as likely as White people to be uninsured. Additionally, undocumented immigrants are ineligible for federally funded coverage, further exacerbating their financial challenges.

Addressing the issue of high out-of-pocket expenses requires a comprehensive approach that targets insurance coverage expansions, cost-sharing requirements, and the affordability of care. By reducing financial barriers and improving access to care, individuals can receive the necessary treatment without facing overwhelming financial burdens.

Lack of coverage for prescriptions

Even with health insurance, many Americans face challenges when it comes to affording prescription medications. This is due to a variety of factors, including high out-of-pocket costs, insurance plans not covering specific drugs, and the high cost of prescription drugs. This can lead to people having to make difficult choices about their health and sometimes going without their prescribed medications.

A survey by NPR, the Robert Wood Johnson Foundation, and the Harvard T.H. Chan School of Public Health found that more than one-third of adults across all income groups had been told by their health insurance plan that it would not cover a prescribed drug in the past year. This issue was most common among lower-income adults, with 49% reporting this experience. As a result, many people are left with the full cost of their medications, which can be extremely expensive.

When insurance plans do not cover a prescribed medication, individuals are often left to cover the full cost themselves. This can be a significant financial burden, especially for those on lower incomes or with existing health conditions that require regular medication. In some cases, people may be unable to afford the medication they need, leading to negative health outcomes.

To mitigate the costs, some people may opt for generic medications or alternative treatments that are more affordable. Generic medications contain the same active ingredients as brand-name drugs but are usually more affordable and more likely to be covered by insurance plans. Additionally, patient assistance and manufacturer copay programs can help individuals cover the costs of specific medications, especially costly brand-name drugs that are often not covered by insurance. These programs can reduce out-of-pocket costs to $0 per month for people with or without insurance.

Another option is to request an exception from the insurance company or appeal their decision. Individuals can ask their insurer to make a formulary exception and provide coverage for their prescribed drug, especially if it is medically necessary and no other alternatives are suitable. If the request is denied, individuals have the right to file an appeal or request an external review by a neutral third party.

The high cost of prescription drugs is a significant issue for many Americans, and the lack of coverage by insurance plans only exacerbates the problem. It is important for individuals to be aware of their options, such as generic medications, patient assistance programs, and appeals processes, to ensure they can access the medications they need without incurring excessive financial burden.

Delayed or forgone care

Even with health insurance, many Americans are unable to afford healthcare due to limited financial protection. This has resulted in people forgoing necessary medical care and prescriptions to avoid high out-of-pocket costs. A survey by the Commonwealth Fund found that 43% of working-age adults were inadequately insured, with 23% being insured all year but still facing unaffordable access to healthcare. As a result, people delay or skip medical visits, recommended treatments, tests, follow-up visits, or filling prescriptions due to costs.

The problem is more prevalent among those with lower incomes, those in fair or poor health, and those with chronic health conditions. People with chronic conditions, such as diabetes, lung diseases, heart failure, or heart attacks, often face the difficult choice of forgoing prescription medications due to cost. This can lead to long-term consequences for their health and well-being.

The issue of delayed or forgone care is not limited to those with insurance coverage. Uninsured individuals are also more likely to delay or forgo care due to costs. They often have no regular doctor and limited access to prescription medications, leading to higher rates of hospitalization for health conditions that could have been avoided. This results in higher healthcare costs for everyone, as the burden of treating uninsured individuals falls upon the insured population, hospitals, doctors, and the government.

The concern of cost is a key reason why many Americans are uninsured or underinsured. They may choose not to seek insurance coverage or delay obtaining necessary care due to the fear of high medical bills. This can lead to a downward spiral of worsening health and increasing financial burden, affecting not only their lives but also their productivity and the overall well-being of the economy.

Medical debt

Healthcare debt disproportionately affects lower-income adults, the uninsured, Black and Hispanic adults, women, and parents. People with lower incomes are more likely to be underinsured or unable to afford treatments due to cost. This results in long-term consequences, such as damage to credit ratings, having to dip into savings, or an inability to pay for other necessities such as food, heat, or rent.

High healthcare costs can lead to medical debt, even for those with health insurance. About half of insured adults worry about affording their monthly health insurance premium, and large shares of adults with employer-sponsored insurance rate their insurance poorly when it comes to monthly premiums and out-of-pocket costs.

The Affordable Care Act (ACA) has expanded health insurance to millions of Americans, but an estimated 30.4 million people were still uninsured in 2018, with nearly half of uninsured adults eligible for subsidized insurance. The high cost of insurance is a key reason why many are uninsured.

Healthcare costs can lead people to put off needed care, with one in four adults saying they have skipped or postponed getting healthcare due to cost. This rises to six in ten uninsured adults (61%) who say they went without needed care because of the cost.

Prescription drug costs also present a challenge, with about one in five adults (21%) saying they have not filled a prescription because of the cost. This can lead to people cutting back on their medications or taking alternative, cheaper drugs.

Racial disparities

Gaps in health insurance coverage have long existed along racial lines in the United States, with non-elderly Hispanic, Black, Asian, American Indian and Alaska Native, and Native Hawaiian and Other Pacific Islander (NHOPI) people more likely to be uninsured compared to their White counterparts. These disparities are driven by lower rates of private coverage among these groups, and while Medicaid coverage helps to narrow these differences, it does not completely offset them.

Hispanic and AIAN people had the highest uninsured rates as of 2022, at 18% and 19.1% respectively. Uninsured rates for nonelderly NHOPI and Black people were also higher than the rate for White people, at 12.7% and 10% respectively. Coverage disparities have persisted over time and in some cases widened, despite recent gains and earlier large gains in coverage under the Affordable Care Act (ACA).

Differences in coverage rates between Hispanic, Black, and NHOPI people compared with White people are larger in non-expansion states compared with expansion states. However, the relative risk of being uninsured for Black and Hispanic people compared to White people is similar in expansion and non-expansion states.

Uninsured rates among racial minorities are driven by socioeconomic characteristics—income, employment, citizenship, and language—that are more prevalent in minority populations. For example, rates of unemployment are higher among African American men and women than their White counterparts, and job loss is more prevalent among minority groups. African Americans and Hispanics are also less likely to marry than White people, and among those who do marry, their first marriages are more likely to end in divorce, and the proportion remarrying is lower.

The dynamic nature of insurance coverage also plays a role in racial disparities. The vast majority of people live without insurance in short spells, but some experience longer periods of uninsurance. Young adults, individuals with less education, the unemployed, and the unmarried have higher rates of losing health insurance, and once an individual loses health insurance, their demographic and socioeconomic characteristics determine how quickly they will regain coverage.

Hispanic and African American populations have a greater prevalence of trigger events and socioeconomic characteristics that are associated with greater insurance loss and slower insurance gain. Despite being more likely to gain insurance within a year of losing it, African Americans' high rates of insurance loss more than negate this advantage. Hispanics have the lowest rates of insurance gain relative to White people, and together with their greater rates of loss, this contributes to their higher uninsured rates.

Overall, research shows that having health insurance makes a key difference in whether, when, and where people get medical care and ultimately how healthy they are.

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