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2 Concepts of Medical Care Economic Burden and Risk
Pages 27-50

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From page 27...
... Office of Management and Budget, the Census Bureau added questions about out-of-pocket spending on insurance premiums and medical expenses to its Current Population Survey Annual Social and Economic Supplement (CPS ASEC) in 2010 to enable inclusion of medical care expenses and premiums in SPM estimates.1 The results 1  These questions gave estimates that compared favorably with estimates of out-of-pocket medical care costs in the Medical Expenditure Panel Survey (see Czajka, in Part III of this volume)
From page 28...
... Over time, the SPM will be able to track changes in the extent to which individuals and families with modest or low incomes are impoverished as a result of spending on health insurance premiums and other medical care expenses that are high relative to their incomes. However, although the Census Bureau has the data available, its current reporting does not assess the extent to which families or individuals who are poor without considering medical care expenses are pulled deeper into poverty (well below the threshold)
From page 29...
... (2010b) ; and Private Health Insurance Provisions in the Patient Protection and Affordable Care Act (PPACA)
From page 30...
... . By expanding coverage to those who are currently uninsured and by setting standards for health insurance benefits, the ACA seeks to limit not only the economic burden of medical care expenses, but also the risk that individuals or families will forgo needed medical care because of the cost or be at financial risk if they should become sick or injured during the year.
From page 31...
... SOURCE: Kaiser Family Foundation (2010) , Figure 5.1.
From page 32...
... SOURCE: Kaiser Family Foundation (2010) , Figure 3.4.
From page 33...
... This chapter describes the conceptual difference between medical care economic burden and risk, discusses why the panel thinks both measures are needed to inform national and state policy and to assess trends, and indicates why it is important to keep the two measurement efforts conceptually distinct. In our discussion of the economic burden of medical care expenses, the panel endorses the 1995 NRC recommendations regarding the approach to incorporating medical care expenses into supplemental poverty measures.
From page 34...
... can expose a family to the economic risk of poverty or bankruptcy even though the family has insurance. Such households could be considered "underinsured" -- remaining at high financial risk although insured all year (Schoen et al., 2011; Short and Banthin, 1995)
From page 35...
... When the other income adjustments are made first and the subtraction of medical care expenses is then performed and the effects shown separately, as the Census Bureau has done for the SPM, then this becomes an estimate of burden, or how many more people are poor when their medical care expenses, including premiums paid out-of-pocket, are taken into account. The 1995 panel also envisioned a measure of medical care economic risk that would assess the family's ability to financially access available medical care needed to maintain health or for the treatment of a health crisis.
From page 36...
... Starting in March 2010, the Census Bureau added questions to its annual household survey about medical outof-pocket expenses for insurance premiums and medical care services to use in constructing a new SPM. SPM Treatment of Medical Care The SPM threshold concept for families' basic needs includes food, clothing, shelter, utilities, and a little more, but not medical care premiums or other out-of-pocket expenses.
From page 37...
... It should also be noted that the SPM definition of a family, which is proposed for measuring medical care economic burden as well, begins with but extends beyond the traditional Census Bureau definition that is used for the official poverty measure. The traditional family definition includes two or more people in a household, one of whom must be the householder or reference person, who are related by blood, marriage, or adoption.
From page 38...
... Illustrative Effects of Medical Care Costs on Poverty The Census Bureau is now publishing the number and characteristics of the poor using the SPM, along with tables that show the net impact of each adjustment to the SPM estimates if all other adjustments were in effect. As shown in Table 2-2, subtracting medical care expenses from net after-tax and transfer income significantly increased the SPM poverty rate in 2010 along with the number of people considered poor with income too low to afford basic necessities.
From page 39...
... AFFORDABILITY: ABSOLUTE OR RELATIVE CONCEPT? The measurement of medical care economic burden discussed above is framed in the context of an absolute measure of affordability related to poverty, but there can also be relative measures of affordability that apply to families along the entire income spectrum.
From page 40...
... For example, the Children's Health Insurance Program sets a maximum of 5 percent of income for out-of-pocket medical care expenses for families with incomes below 200 percent of poverty to reflect incomes that are already stretched to meet basic nonmedical needs. The goal is to avoid driving such families into poverty from medical care expenses.
From page 41...
... of the potential of these provisions to make health insurance and health care affordable, they conclude that the provisions appear relatively well targeted, based on current expen Necessities, premiums, and 90th 30 percentile out-of-pocket cost Necessities, premium, and 25 median out-of-pocket cost Percentage of Households Necessities and premiums 20 15 10 5 0 <100% 101- 151- 201- 251- 301- 351- 401- 451- >500% 150% 200% 250% 300% 350% 400% 450% 500% Percentage of Federal Poverty Level FIGURE 2-3 Percentage of households that may not have room in budget for health care costs, after full ACA implementation. SOURCE: Gruber and Perry (2011)
From page 42...
... Because of this limit it would be useful to continue to build on the Supplemental Poverty Measure to assess and track how medical care economic burden changes over time. RECOMMENDATIONS FOR MEASURING MEDICAL CARE ECONOMIC BURDEN Providing Additional Information in Census Bureau SPM Reports In the context of new national medical care policy that makes a commitment to affordability with explicit standards and thresholds, the im
From page 43...
... By this recommendation the panel supports not only showing the effects on SPM poverty estimates of the composite measure of out-of-pocket medical care spending, as is currently done, but also showing separately the effects of spending on out-of-pocket premiums and medical care costs to assess the impact of each on the SPM estimates. The panel also urges that Census Bureau SPM reports provide not only national estimates, but also estimates at the state or regional level to assess how medical care economic burden varies geographically.
From page 44...
... Census Bureau report findings on medical care economic burden in its Supple mental Poverty Measure reports and tables separately for the popula tions under age 65 and ages 65 and older. Very different health insurance coverage policies currently apply for those reaching age 65 and eligible for Medicare compared with the population under 65.
From page 45...
... Measuring the actual economic burden of medical care, as is done in the expanded SPM reports recommended here, will underestimate the impact on uninsured people who may spend less than judged medically necessary, given their health care needs, because they cannot afford medical care.6 The ITWG suggested that the Census Bureau investigate the "pros and cons" for the SPM resource definition of making an upward adjustment to medical care spending for the uninsured, based on what they might have spent if insured, considering their age and health status (Interagency Technical Working Group, 2010)
From page 46...
... To the extent that policies succeed in enrolling the uninsured into plans that provide affordable insurance with low or no premiums for those who are below or near poverty, with insurance choices that enhance access with protection against out-of-pocket medical care bills, the economic burden approach currently used by the Census Bureau should find a reduction in the number of people who are impoverished by out-of-pocket medical care costs as well as a drop in the number of uninsured. Similarly, for those with insurance, if policy reforms result in benefit standards that improve protection and new premium subsidies that lower premium costs, the medical economic burden approach that the Census Bureau is currently using should indicate a reduction in the number of insured families with low incomes that have high out-of-pocket medical care costs for medical care.
From page 47...
... It will be important to keep metrics that assess burden anchored in retrospective costs -- what actually happened -- and distinct from measures of risk that predict medical spending prospectively to assess the population at economic risk as a result of being uninsured or inadequately insured. MEDICAL CARE ECONOMIC RISK At the same time, we agree with the 1995 panel recommendations that it is important to also develop a new measure of medical care economic risk that prospectively assesses financial risk to low- or middle-income families who are either uninsured or inadequately insured given their incomes and health status.
From page 48...
... A measure of medical care economic risk is needed to assess the exposure to, or potential for, incurring expenses in the future. This is especially true because of the skewed nature of medical care costs.
From page 49...
... . Because these benefit designs may be relatively standardized, it would be possible to include an additional question in such surveys as the CPS ASEC and the Medical Expenditure Panel Survey regarding plan choice level, or at some point in the future merging this information with enrollment files, especially for those who receive premium assistance.9 Using a combination of retrospective data on past spending patterns, it would be possible to project risk in advance of enrollment changes (see Chapter 4 on modeling medical care economic risk and Chapter 5 on potential data sources for development and implementation of a model)
From page 50...
... the type of insurance to estimate financial exposure. With such information, as a companion to the SPM and consistent with the measure of medical care economic burden, a measure of medical care economic risk could be calculated for families (and unrelated individuals)


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