Press Release Thursday, August 10, 2000

Contact: Contact: Gail Shearer/David Butler 202/462-6262 Consumers Union's Washington, DC Office

WASHINGTON, D.C. -- Despite the unprecedented growth of the U.S. economy, the cost of health care continues to place an enormous burden on Americans who are seriously ill, as well as those who have moderate and low incomes.

According to Consumers Union, the nation is faced with a "health care divide," a condition in which the financial burden of health care is much heavier for the sick, the middle class, and the poor than it is for the healthy and the wealthy.

The sickest 10 percent of Americans account for 68 percent of the money spent on health care each year, according to "The Health Care Divide," a national study by Consumers Union's Washington DC office.

The study was written by Gail Shearer, Consumers Union's Director of Health Policy Analysis, based on data compiled by the Lewin Group, a health care policy research firm.

"Our health care system is characterized by divisions," said Ms. Shearer. "People with health insurance receive more care than the uninsured, who often cannot afford the care they need. Even among those with insurance, the healthy are divided from the sick, leaving the sick to shoulder large financial burdens. The burden of paying for health care divides people by income, with those at the lower income levels paying the largest share of income for health care. Until we overcome these divisions in our health care system, the goal of achieving affordable, universal health care coverage will continue to elude us."

"The Health Care Divide" finds that the sickest 10 percent of Americans pay seven times what the average American spends on health care.

The study also examines how much families have to budget for health care, taking into account what they spend on insurance premiums as well as out-of-pocket costs. It finds that:

· Families with incomes of at least $100,000 spend 3 percent of their income on health care. Meanwhile, families making $45,000 spend 6 percent of their income on health care, and families making under $10,000 spend 17 percent on health care.

In other words:

· Middle-income families spend twice the percentage of income that wealthy families spend on health care expenses; and

· The poorest families spend six times the percentage of income that wealthy families spend on health care.

The study also finds that one in six households headed by a person under 65 spends 10 percent or more of family income on health insurance premiums and out-of-pocket costs. The burden increases dramatically with age, with one in every two households headed by a person over 65 spending more than 10 percent of family income on health care.

The private marketplace has failed to provide affordable health care to all Americans. Piecemeal attempts at reforming America's health care system have not reduced the number of Americans without health insurance, which stands at 44 million people and rising. Nor have these incremental approaches addressed the problem of Americans who have health insurance, but not enough to cover their bills if they become seriously ill.

"When health care was the federal government's major topic of debate in 1994, many of those who rejected the idea of providing comprehensive coverage argued that most of the system's problems could be solved by the marketplace and smaller, limited initiatives," said Ms. Shearer. "However, this Consumers Union report makes it clear that problems in our health care system are getting worse instead of better. The 'health care divide' has only become deeper in the last six years."

Considering these findings and the fact that the federal government now has a budget surplus estimated at over $4 trillion, Consumers Union believes that it is time for Washington policymakers to renew discussions of establishing a system that provides universal health coverage.

"With its unprecedented budget surpluses, Congress should establish, as a matter of law, that all people in this country have a right to health care coverage -- comprehensive, affordable, quality health care coverage," said Ms. Shearer.

If policymakers are not willing to take a comprehensive approach, Consumers Union believes that they should address the needs of those who are most vulnerable in our society. Congress should pass a law to ensure that all children have comprehensive health coverage. It should approve a universal Medicare prescription drug plan. Medicare should be expanded to people between 55 and 64, and Medicaid and the State Children's Health Insurance Program should be extended to the parents of the children enrolled in these programs.

Consumers Union also believes that Congress should reject proposals that perpetuate the failings of the marketplace, such as medical savings accounts (MSAs), healthmarts, and association health plans. While touted by some as ways to help more people get health insurance, these programs would eventually put health insurance out of reach for many Americans. These programs appeal mostly to people who are healthy and thus pull healthier people out of traditional insurance programs. As a result, those left with traditional health insurance would be forced to pay higher premiums. MSAs, health marts, and association health plans would only deepen the "health care divide."

Consumers Union's report "The Health Care Divide" is available online in the Health section on this web site. To obtain a copy of the tables of health care expenditures compiled by the Lewin Group that serve as the basis of the study, contact Gail Shearer or David Butler at (202) 462-6262.

Consumers Union, publisher of Consumer Reports magazine, is an independent, nonprofit testing and information-gathering organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers. Consumers Union is online at www.consumersunion.org.