Healthcare spending represents 2.5 percent of household income, according to a study done by the Center for Studying Health System Change. This amount is even higher for low-income families when factoring in prior medical debts (i.e. unpaid hospital bills, lack of health insurance, etc.) causing a financial burden that the Patient Protection and Affordable Care Act (ACA or Obamacare) seeks to address. As out-of-pocket spending on premiums, deductibles, prescription drug co-pays, and other expenses grow the choice between getting healthy and staying sick becomes an unfortunate one for those without the financial means to pay for healthcare.
The impact the lack of healthcare has on individual finances, coupled with the rising cost of healthcare in the United States, is a concern that not only affects individuals but society as a whole. Whether or not the ultimate benefit from the ACA will be realized anytime soon, moving some 47 million Americans from the ranks of the uninsured (particularly those who are currently in good health) will help lower the overall cost burden share that we all feel.
The Impact Healthcare Spending has on Personal Finances
The problem with healthcare spending for most individuals and families has two parts. The first has to do with not having adequate levels of coverage in place to protect against catastrophic risk brought on by a specific disease or health issue that could virtually bankrupt an uninsured person. The second has to do with the failure to maintain health on a preventive basis because of cost and/or limitations in existing health insurance plans to meet these expenses.
Medical expenses caused by catastrophic health conditions (i.e. cancer, traumatic injury, etc.) have led to nearly 2 million Americans filing for what is known as medical bankruptcies. Healthcare related expenses are the number one cause of bankruptcy filings in the country, surpassing credit card and mortgage debt. Further, a Kaiser Foundation study found that the majority of those without health insurance are low income or the working poor. African Americans and Latinos are also more likely to be uninsured.
Are Higher Healthcare Expenditures Good for Society?
Healthcare spending in the United States represents 17.7 percent of the country’s GDP. This amount is higher than the rate of healthcare spending in Germany (11.3 percent of GDP), Canada (11.2 percent of GDP), Sweden (9.5 percent of GDP), and England (9.4 percent of GDP). Spending more, however, does not mean Americans are healthier compared to the rest of the world. Additionally, healthcare spending has increased 818 percent since 1960, which is nearly 5 times more that the growth of GDP during the same period (168 percent) and 50 times higher that wage growth (16 percent). The rate of growth in health spending cannot be sustained, particularly when considering the needs of the aging Baby Boomer population (born 1946-1964) and their demand on public spending programs such as Medicare and Medicaid.
Will Obamacare Reduce the Financial Burden?
The chief aim of the ACA is to remove the barriers to access to healthcare by making it affordable and available to those who do not have health insurance. Public and private healthcare spending in the United States is the highest in the world (2.5 times higher than the average for Organization for Economic Cooperation and Development countries).
Reducing some of the cost triggers that have caused healthcare spending to rise and bringing them in line with other OECD nations with comparable wealth will be a challenge that Obamacare will need to address in order to reverse the costliness of healthcare and its negative impact on personal finances.