Reversing a long-term trend, healthcare spending has increased for the wealthy. “The rich in the United States – despite being healthier on average than the poor – have become the biggest buyers of healthcare, a dramatic shift in spending patterns across income groups, according to a new Harvard study,” notes CNBC

Why the Shift in Spending Patterns?

When the federal Medicare program passed in 1965, healthcare expenditures increased for the poor, as they now had access to coverage under the Medicare and Medicaid programs. This trend lasted until 2004, when “expenditures fell for the lowest quintile, while rising more than 10% for the middle three quintiles and close to 20% for the highest income quintile” for the next eight years, according to the study. 

Simply put, the wealthy began to spend more, while the poor and middle class cut back. What caused this sudden shift? Stagnant wage growth and exorbitant out-of-pocket costs were cited as the primary culprits. According to USA Today, “The size of the average deductible more than doubled in eight years, from $584 to $1,217 for individual coverage. Add to this co-pays, co-insurance and the price of drugs or procedures not covered by plans – and it’s all too much for many Americans.” (See Healthcare Premiums Rise Faster Than Wages in Recent Years.) 

High Deductibles and Cost-Sharing

Before your insurance kicks in and begins to cover your medical expenses, you have to meet your deductible. Unfortunately, many of the plans with lower monthly premiums are accompanied by hefty deductibles that make the cost of care unaffordable for both the poor and middle class.

What’s more, those with serious conditions that require routine treatment by a medical professional must come up with cash to cover co-pays for each visit, along with any prescription drugs they may need each month. Adding to this is the cost of co-insurance, the percentage of covered costs that patients must pay after the deductible has been met.

The Affordable Care Act (ACA)

Those who don’t qualify or have access to employer-based health insurance plans – or Medicare – are required to get health insurance through the Affordable Care Act (ACA). This enabled many low-income individuals to finally able obtain coverage due to the expansion of Medicaid eligibility in many states under the ACA. However, those who were in higher (but not high) income brackets that didn’t qualify for Medicaid often chose the ACA's lower-premium silver or bronze plans because of their more affordable premiums. However, these plans are accompanied by extremely high deductibles and cost-sharing provisions. “The federal government has more or less endorsed the idea that these huge deductibles [for ACA plans] are acceptable, and that has been part of the problem,” Dr. Steffie Woolhandler told CNBC. 

There are also gold plans, which have lower deductibles and cost-sharing requirements than silver or bronze ones, but for many the premiums are unaffordable. Poor, long-uninsured patients are getting Medicaid through Obamacare and finally coming [in] for care, [but] middle-class workers are increasingly staying away,” physician Praveen Arla told USA Today. (For more, see Obamacare: Steep Premium Hikes Expected in 2017 (UNH).)

The Bottom Line

Despite their often-higher healthcare needs, the poor and middle class are forgoing treatment as a result of stagnant wage growth and high out-of-pocket costs. As a result, they are spending less on healthcare, and the wealthy have claimed the top spot.

 

 

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