Press Release January 22, 1998	Contact: 202/462-6262 Gail Shearer, sheaga@consumer.org Kathleen McShea, mcshka@ consumer.org Consumer Union Washington, D. C. Office

New Report Finds Health Care Burden is Growing

WASHINGTON -- Almost nine million families who have insurance are paying more than ten percent of their annual income on the health insurance premiums, co-pays and deductibles they must pay out of their pocket, finds a Consumers Union (CU) report released today.

"Our research found unexpected health care expenses bring crushing financial burdens for many families who thought they had protection. Far too many consumers are not finding the kind of financial security they expect from their health insurance policies," said Gail Shearer, author of the report, Hidden from View: the Growing Burden of Health Care Costs.

"Although people figure their insurance is going to be there for them when they get sick, our research shows that too often it is not," said Shearer. "Even when everyone in the family has health insurance, about nine million families are still faced with medical bills that eat up more than 10 percent of their income."

CU, publisher of Consumer Reports magazine, contracted with The Lewin Group, a private health research firm, to study what people, employers and the government actually pay for health care. CU's analysis shows the number of privately insured Americans who can be called underinsured, because they are at risk of spending more than 10% of their income on out-of-pocket medical bills, increased nearly 40% since 1981.

As a result of inadequate insurance, consumers can suffer devastating financial burdens at the same time they face serious illness or injury. According to the report:

• 11 million non-elderly American families (1 in 8) spent more than ten percent of their income on premiums plus out-of-pocket costs in 1996.
   
• Every American is at risk of facing a serious illness or accident during his or her lifetime that results in staggering bills, which can cripple a family budget. The 10% of our population with the severest health care problems has total health care costs of about $21,000 in a year, seven times the level of total spending of the average person.
   
• People in the top percentile (1%) of health spending have total health care costs of more than $81,000 a year.
   
• Over 20% of families headed by people 55 to 64 and more than half of the families headed by people over 65 pay over 10% of their income on medical bills.
   
• Among the groups hit particularly hard by the lack of affordable health care are people age 55 - 64, potential early retirees, who have no insurance. About 14% of this age bracket lacked insurance in 1994. This group had total health care costs that are about 60% higher than average.

"Today's health care financing system has shifted what it means to have insurance," Gail Shearer said. "Instead of a clear-cut question -- 'Do you have insurance?' -- consumers instead face a confusing continuum of risk that leaves millions uninsured or underinsured. When people get sick and need reliable, quality health care, many end up facing enormous bills that their insurance policy doesn't cover."

Despite the private market's recent success in holding down health care premiums, this report shows that the market has been unable to deal with many of the health care burdens facing our society. "Even in the best of economic times, affordable health care remains out of reach for millions of families," said Shearer. As CU's report shows, the private market is not any closer to delivering reliable, quality health care to those who get sick. It is time, therefore, to reexamine national strategies to address health care affordability. Among the proposals Consumers Union urges Congress and the Clinton Administration to pursue are:

• Using the tax code to better target relief for families in crisis due to health care costs by creating a new medical tax credit targeted to the poor and middle class;
   
• Ensuring that early retirees and other adults have access to affordable comprehensive insurance coverage through a Medicare buy-in;
   
• Assuring that insured consumers have quality protection by eliminating lifetime limits, or at least increased to a minimum of $10 million; and
   
• Encouraging policies which place annual caps on out-of-pocket expenses.

The report presents consumers with a five question "Security Test" to judge whether their own insurance policies could leave them underinsured:

1. Does your health plan limit out-of-pocket costs (for covered charges) after you have paid a fixed amount?
2. Does your policy provide comprehensive benefits including not only doctor and hospital care, but also prescription drugs?
3. Is the insurance company's schedule of  "allowable charges" realistic?
4. Does your policy put costly limits on mental health coverage?
5. Does your policy limit lifetime benefits meaning your coverage would run out if you suffer a truly catastrophic accident or illness?

In examining how well the health care marketplace is serving consumers, CU found millions of American families have health insurance policies that flunk this security test.

Copies of the full report are available to the public for $20.00 plus $5.00 shipping and handling.  Please make checks payable to "Consumers Union."

Supporting documents listed on this Web site are also available on a faxback line at (202) 238-9258.