Year one, ObamaCare report card shows health care costs rising

As health care reform marks its one-year anniversary, a new Deloitte report reveals that consumers are spending $363 billion, or 14.7 percent more, on health care than traditionally reported in official government accounts. This spending falls outside of conventionally-counted health care costs such as doctors, prescriptions, hospitals, and health insurance coverage. Demonstrating the significance of the amount consumers now spend on health care, the additional costs captured in the new Deloitte study support an increase in consumer discretionary spending on health care from 16.2 percent, for items traditionally reported by the government, to 19.9 percent, which surpasses housing and utility costs at 18.8 percent.

More than half of the spending (55 percent) in these ancillary areas was for the estimated value of supervisory care, or care given by unpaid relatives and friends. Supplemental expenditures included complementary and alternative medicine (CAM) practitioners (8 percent) and products (1 percent), functional foods and other nutritional products, vitamin and mineral supplements (15 percent), health publications (1 percent), ambulance services (3 percent), other ambulatory care, such as blood banks, some health promotion programs (6 percent), mental health services (8 percent), homes for the elderly (4 percent), and weight loss facilities (1 percent).

"It has been one year since the passage of health care reform, and our report sheds new light on the hidden costs of health care and how these costs can add up significantly to billions of dollars and can even eclipse housing as a household expense, " said Paul Keckley, Ph.D., executive director, Deloitte Center for Health Solutions. "Our study explores the financial context for the decisions consumers – not simply patients – make about how they spend their money on health care, which will only increase in importance as health care reform continues to take hold."

The Deloitte report, "The Hidden Costs of U.S. Health Care for Consumers: A Comprehensive Analysis," was conducted by Deloitte's Center for Health Solutions and Center for Financial Services to gauge the total costs consumers really spend out of their own pockets on health care products and services, beyond what is typically paid by insurers and other government sources, such as Medicare and Medicaid.

"The ability of the U.S. economy to recover will be affected in part by how much consumers have in their pockets to spend," said Andrew Freeman, executive director of the Deloitte Center for Financial Services. "This reveals a tremendous burden on the average consumer."

Additional findings in the report:

  • According to the Deloitte study, the total 2009 U.S. per capita expenditures were $9,217; professional services (29 percent) and hospital care (27 percent) were the biggest categories.
  • The estimated value of supervisory care ($199 billion) is significantly higher than total spending on nursing homes ($144 billion) and total spending on home health care ($72 billion), and was only somewhat less than prescription drug expenditures ($246 billion).
  • Around 70 percent of spending on nutrition industry items was directed towards functional foods, a category which includes such items as enriched cereals, breads, sports drinks, bars, fortified snack foods, baby foods, and prepared meals.
  • Seniors account for 36 percent ($1.01 trillion) of total health care expenditures, but are only 13 percent of the population.
  • Nearly 83 percent of the $2.83 trillion 2009 U.S. health expenditures were attributed to those with family incomes of $100,000 or less, who make up 89 percent of the total population.
  • One in five (21 percent) adults surveyed said they paid a medical bill late in the last 12 months.
  • A total of 27 percent of adults estimate that 5 percent or less of their household budget is spent on health care; 17 percent said 26 percent or more is spent on health care.
  • A majority (80 percent) of adults surveyed said they would use generic medicines, seek free advice from a pharmacist or other medical professional (70 percent), and use technology (61 percent) if it would save money for health care.
  • Approximately 43 percent would visit a retail clinic, and one in five (20 percent) would visit another country for more affordable medical care.
  • And, 26 percent would skip a medical test or screening, skip a visit to the dentist or doctor altogether (26 percent), or skip refilling a prescription (22 percent) to save money on health care.

"Our study suggests that as the U.S. economy struggles to rebound and consumers continue to be stretched to pay their bills, they are confronted with difficult choices, such as paying for health care instead of other household expenses," added Keckley. "Many consumers are turning to alternative and over-the-counter products, switching to generic medicines, or even skipping the doctor or visiting a retail clinic instead to save money. Health care organizations looking to address these unmet consumer needs should consider their strategy to expand their focus to include alternative products and services outside of the confines of the traditional health care sector."

Methodology

In this study, the most recently available NHEA data (2008) was projected for 2009. Information drawn from a variety of sources was used to produce estimates of health expenditure in identified additional areas. Information from the Medical Expenditure Panel Survey (MEPS) was used to develop estimates of expenditure by family size and income. When combined, a dataset was produced which represented a broader picture of the health sector in 2009. This final dataset estimated total health expenditure by payment source, age group, family income and family size for each health service area.

Consumer Telephone Survey

The Deloitte Center for Health Solutions commissioned Harris Interactive to conduct a telephone survey of 1,008 U.S. adults 18 years-old and older between September 29October 4, 2010. Data were weighted to be representative of the total U.S. adult population on the basis of age, sex, race/ethnicity, education, region, number of adults in the household, and the number of phone lines in the household where necessary to align them with their actual proportions in the population. The survey results have a sampling error of +/- 3 percentage points at the 95 percent confidence level.  

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