Don’t forget the underinsured

High Out-of-Pocket Medical Spending among the Poor and Elderly in Nine Developed Countries

By Katherine Baird
HSR, August 2016

Objective:  The design of health insurance, and the role out-of-pocket (OOP) payments play in it, is a key policy issue as rising health costs have encouraged greater cost-sharing measures. This paper compares the percentage of Americans spending large amounts OOP to meet their health needs with percentages in eight other developed countries. By disaggregating by age and income, the paper focuses on the poor and elderly populations within each.

Principal Findings:  The United States is not alone in exposing large numbers of citizens to high OOP expenses. In six of the other eight countries, one-quarter or more of low-income citizens devoted at least 5 percent of their income to OOP expenses, and in all but two countries, more than 1 in 10 elderly citizens had high medical expenses.

Conclusions:  For some populations in the sample nations, health insurance does not provide adequate financial protection and likely contributes to inequities in health care delivery and outcomes.

From the Results

In five nations, more than ten percent of individuals lived in households with high medical spending (United States, Poland, Israel, Switzerland, and Russia), and only in France (2.9 percent) did less than five percent of the population incur high OOP expenses.

From the Discussion

This study provides some of the best comparative evidence to date of the variation within and between countries of the percentage of citizens exposed to high OOP medical expenses. The results foremost underscore the very high financial burden that using health care places on many Americans.

But unlike other studies, I also find that high spending among poor and elderly Americans is equally common among their counterparts in many other countries. In seven of the nine countries (United States, Japan, Australia, Poland, Israel, Russia, and Switzerland), one-quarter or more of poor citizens devoted at least 5 percent of their income to OOP expenses; and in all nine countries, at least one-in-ten poor citizens did. Underinsurance rates among the elderly were somewhat lower than among the poor, yet the results show that one-in-four elderly citizens had high OOP expenditures in Switzerland, Russia, Poland, and Israel, while more than 15 percent did in Australia, Slovenia, Japan, and the United States.

From the Conclusions

The finding that the United States is not an outlier when it comes to the financial burden resulting from health care consumption in the sample of countries here highlights the fact that health insurance in many countries is commonly porous: high levels of OOP spending frequently occur in many countries despite universal insurance and the existence of policies that supposedly limit citizens’ financial exposure. The complicated nature of health care and health insurance benefits; the complex ways in which consumers respond to insurance benefits and their limits; and finally the often significant health risks not covered by insurance policies: all of these combine to leave large numbers of people across many countries devoting considerable resources to meeting their health care needs. Considering the evidence, then, solving the problem of the uninsured in the United States will most likely leave standing the separate one of underinsurance, unless policy seeks to tackle them both.



By Don McCanne, M.D.

Underinsurance - excessive out-of-pocket expenses for health care - results in financial hardship not only in the United States but also in other developed nations as well. Of the nine nations in this study, only France has insurance that is adequate to prevent financial burdens from out-of-pocket spending.

During reform processes, there is always a struggle on how to make insurance affordable. When the Affordable Care Act was crafted, to keep insurance premiums down it was decided that the benchmark plan would have an actuarial value of only 70 percent - the patient would be responsible for covering an average of 30 percent of the bill. It was obvious that this was too much of a burden for most individuals so they provided subsidies for out-of-pocket expenses for low-income individuals and placed a cap on out-of-pocket spending for covered benefits, but not for out-of-network care. This has left too many exposed to the very high deductibles that were required to keep the actuarial value down to 70 percent.

Yet France, with a per capita spending on health care near the OECD average, has shown us that patient cost sharing is not necessary to slow health care spending. Other studies have shown that, not only does cost sharing frequently create financial hardship, it also causes patients to forgo beneficial health care services. Both are bad, and they are avoidable.

The lesson is that getting everyone insured is not enough. We also need to eliminate underinsurance. We need to keep that in mind when we enact a single payer national health program - the improved in an Improved Medicare for All. There are too many in the policy community who accept, as blind faith, the necessity of high deductibles, so it will be a battle.