Deciphering the True Cost of Health Care for People in the USA

Americans are often confused about actual healthcare costs versus their out-of-pocket expenses, this article reviews the latest information on what U.S. residents pay for their health care. In 2021, the Centers for Medicare and Medicaid reported that private insurance plans through employers contributed only 17% of total healthcare costs for people in the U.S. This is a surprisingly small contribution considering that about half of the workforce obtains medical insurance through their work. For years the percentage of actual health care spend has been decreasing from employers, with more of the total funding cost passed on to employees. This makes the argument by the insurance industry that employers provide more of the funding for healthcare than the government look pretty weak.

 This table shows who actually pays for healthcare in the U.S.

Who Pays for Healthcare	Percentage of the total spent nationally
Federal government	34%
State & local governments	15%
Employee contribution	27%
Employer contribution	17%
Other private sources	7%
Grand Total	100%

In addition to employee and government contributions, other private revenue sources contributed 7% of all healthcare costs, which represents GoFundMe, private foundations, and contributions from individuals.(Centers for Medicare and Medicaid, 2022)

Components of Health Care Costs

Now let’s look at the various and confusing components of insurance premiums, deductibles, co-insurance, and other pass-through costs that individuals and their families end up paying in the U.S. The mean income (just  as many people are above and below this income level) from employment for an American worker was $54,132 in 2022. The mean household income was $70,784 in 2021. In addition to paying their cost for the insurance premium, those covered in the American health system also are expected to pay co-insurance, which is a percentage of total billed charges, up front deductibles and copayments. Finally, there are uncovered charges for health care services which vary based on the insurance plan. In general, mental health care or counseling is covered very poorly in the U.S., both in terms of actual reimbursement and availability of counselors. Other expenses that may be reimbursed inadequately are prescription drug expenses. This article does not review the cost or adequacy of dental or vision care, although they are certainly health care.

Medical Insurance Premiums

For single employees the amount they paid for their medical insurance was $1,643 per year if they had an employment-based plan. The employers paid $5,737 of the total $7,380 for an individual’s medical insurance in 2021. (Kaiser Family Foundation, 2021) Expenses for family members are typically paid by employees through payroll deductions and the average cost was over $20,000 a year.

Deductibles

A deductible is an upfront expense that an individual must pay in the U.S. before the insurance plan will pay anything. This doesn’t necessarily apply to all services, for example, the Affordable Care Act mandated that plans provide an annual wellness exam and certain other preventive services pre-deductible. In 2021, the Kaiser Employer Survey found the average deductible was $2,004 for an individual and $3,868 for a family. Deductibles were higher in small firms averaging $2,379 versus $1,397. (Kaiser Family Foundation, 2021)

Co-Insurance Expenses

According to Kaiser State Health Facts the average co-insurance for Americans was 19% for primary care and 20% for specialty care in 2020, for those covered on employer plans. Hospital copayments were found to average 20% of charges.  And after paying all of these expenses, the cost sharing doesn’t stop until the individual reaches his/her out-of-pocket maximum which found the majority of employees had out-of-pocket-maximums in excess of $6,000. (Kaiser Family Foundation, 2021) For those covered in the Affordable Care Act Insurance Exchanges out-of-pocket expenses are similar to these, but the cost of the medical insurance premiums are subsidized by tax credits which are advanced from the federal government to help people obtain medical insurance.

Budget Impact on Real People

This table shows one actual person’s budget and data from Kaiser Family Foundation and other sources applied to an individual representing the mean for 2021. As you can see, health care costs are second only to housing for Americans.

Budget Expenses-Individual	$30,000 Annual Income	$54,132 Annual Income
Rent/Housing	$9000 (yr./shared housing)	$22,512 (yr./av/1 bd apart)
Car Insurance/transportation	$1,290 (av/yr./cost)	$1,290
Medical Insurance Premiums	$1,643 (av/yr.)	$1,643
Deductible	$1,669 (av/yr.)	$1,669
Co-insurance & Uncovered expenses	$2,880	$1,444
Taxes(SSSI/Medicare, state, fed)	$4,500	$10,826
Net Available to Live on	$11,898	$14,748

 Impact of Uncovered Health Care Expenses

In the U.S, individuals and families must bear all of the cost of the co-insurance, unless a major expense is incurred and they reach their out-of-pocket maximum which runs thousands of dollars. As observed the ability of middleclass American workers to pay for major expenses is just not sustainable given their wages and the high cost of health care. Medical debt is one of the biggest consumer problems in the country and many states are enacting laws to limit the egregious actions of medical debt collectors and hospitals. Three million people in the country owe over $10,000 in medical debt. The Kaiser Family Foundation 2022 survey found that 7% of the U.S. population has medical debt. Here are some organizations that are advocating for consumers to alleviate this problem:

 https://www.washingtonlawhelp.org/resource/getting-help-with-medical-debt-in-washington

 https://ripmedicaldebt.org/

 https://rightcarealliance.org/

Politicians like to paint a rosier picture of U.S. worker wage gains, but wages haven’t moved much for many millions of people in the nation, averaging a mere 3% per year over the last twenty years. Yet health care continues to become less affordable, with annual costs increasing 4.2%. Despite the federal tax subsidies for corporations and individuals who obtain health insurance, costs are escalating far in excess of inflation annually, representing 18.3% of the gross national product of the country. No other nation spends that much money on healthcare, typically spending 40% less than the U.S. and achieving in many cases, better health outcomes. In a 2020 poll by nonprofit Pew Research, 63% of Americans favored a national healthcare plan, up from 59% the previous year, and this number will continue to increase until the people of this nation have some relief from health care costs.

 And this is the healthpolicymaven encouraging you not to sign blank releases at healthcare organizations when agreeing to inpatient or surgical procedures, do stipulate that for which you agree and which you decline.

 Roberta Winter is a healthpolicyanalyst and freelance journalist who accepts no money from any sector of U.S. healthcare. She is the author of Unraveling U.S. Healthcare-A Personal Guide, which was published by Roman & Littlefield in 2013. She has been a speaker for public, business, and international groups on U.S. healthcare policy, as well as a guest lecturer at the University of Washington.

https://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972

References

Centers for Medicare and Medicaid. (2022). National Health Expenditure Data-2021. Retrieved January 13, 2023, from Centers for Medicare and Medicaid.gov: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet

Kaiser Family Foundation. (2021). 2021 Employer Health Benefits Survey. Kaiser Family Foundation . Retrieved January 17, 2023, from https://www.kff.org/report-section/ehbs-2021-summary-of-findings/#:~:text=The%20average%20coinsurance%20rates%20are,hospital%20admission%20or%20outpatient%20surgery.