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CCH® BENEFITS — 05/20/11

Few Families Without Health Insurance Can Pay Hospital Bills; Costs Shifted To Insured

from Spencer’s Benefits Reports: Few families without health insurance have the financial assets to pay potential hospital bills, according to a new report from the U.S. Department of Health and Human Services (HHS). On average, uninsured families can only afford to pay in full for approximately 12% of hospital stays they may experience—and even higher income uninsured families are unable to pay for most potential hospital stays, the HHS found.

Hospital stays for which the uninsured cannot pay in full represent 95% of the total amount hospitals have billed the uninsured. For the uninsured with incomes above 400% of the federal poverty level (FPL), or $89,400 a year for a family of four in 2011, hospitalizations for which the patient would not be able to pay in full account for 64% of the total amount hospitals have billed the uninsured. Other studies have estimated that the bills for all types of health care that the uninsured cannot pay—the uncompensated cost of care—is up to $73 billion a year, a significant portion of which is shifted into higher costs for Americans with insurance and their employers.

“One of the most enduring myths in American health care is that people without health insurance can get care with little or no problem,” said HHS Secretary Kathleen Sebelius. “Nothing could be farther from the truth. The result is families going without care—or facing health care bills they can’t hope to pay. When the uninsured cannot afford the care they receive, that cost must be absorbed by other payers. This is why expanding access to affordable health insurance under the Affordable Care Act is so important.”

Approximately 50 million Americans are uninsured. The report found that most uninsured people have virtually no savings. In fact, the median financial assets for all uninsured families are just $20, compared to a median of more than $14,450 in assets for the privately insured who are younger than age 65. Half of families with income at 400% of the FPL have financial assets below $4,100, compared to $50,000 for the privately insured under age 65, and these families can afford to pay in full for only 37% of their hospitalizations.

Every year, nearly 2 million uninsured Americans are hospitalized. With 56% of these hospital stays resulting in costs of more than $10,000 in 2008, most uninsured people are unable to afford potential hospital bills; hospitalizations with costs exceeding $100,000 accounted for 6% of the total cost of this care.

Even the top 10% of uninsured families with the most assets are estimated to be able to pay the full bill for only half of potential hospital stays. Uninsured families can, on average, afford to pay the full bills for only about 12% of the hospital stays they might experience, bills that account for just 5% of the total amount hospitals bill them.

The high cost of hospitalization means that lacking health insurance poses a greater risk of financial catastrophe than lacking car insurance or homeowner’s insurance, the HHS observed. Although people are 50% more likely to have a car accident than to be hospitalized in a given year, the average bill for a hospital visit is over two-and-a-half times higher than the average loss for a car accident. And, while the bill for a single hospitalization is about the same as the average loss from a house fire, a person is ten times more likely to be hospitalized than to experience a house fire.

The HHS report acknowleges the limitations of its report as follows: “This analysis underestimates the costs associated with a single hospitalization because the analysis only includes the bills (or costs) for the hospital itself. The analysis does not include the costs of physician fees, ambulance fees, post-acute care expenses, or the possibility of multiple hospitalizations. Expenditures for hospital care represent only 56% of total medical expenditures for the uninsured with one or more hospitalizations. Had additional items been included in the analysis, fewer of the uninsured would have been able to cover the full expenses associated with an entire episode of care.”

For more information, visit http://aspe.hhs.gov/health/reports/2011/ValueofInsurance/rb.shtml.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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