As health care spending has risen, employers have tried to alleviate the pressure on premiums and wages by increasing patients’ cost-sharing at the point of service. Since 2010, deductibles have increased by 67% and premiums by 24% compared with only a 10% increase in earnings. Moreover, the Medicare benefit package is incomplete. Most Medicare beneficiaries purchase supplemental coverage, but rising health-care premiums and policy changes, such as lower payment to Medicare Advantage plans, may create financial barriers for Medicare beneficiaries. The growth in cost-sharing has led to concerns about an increase in under-insurance (when insured people must pay a large share of their income at the point of service to access care). In 2014, 23% of adults were underinsured compared with 13% in 2005.
The projected increase in health care spending and associated increases in premium contributions and cost-sharing create concerns about the ability of households to afford coverage or care. The form of higher spending at the household level also matters. Higher premiums make it harder for people to afford coverage, but benefit design strategies to reduce premiums (such as higher deductibles, coinsurance, and copays) increase risk, causing some unlucky households to face very high out-of-pocket spending.
Publicly financed efforts to mitigate households’ financial burden of premiums and out-of-pocket spending must be weighed against the efficiency losses associated with increased taxes. It is crucial to ask how much health care we can afford to finance with tax revenue, whether directly or through tax exclusions. Ultimately, addressing concerns about affordability requires addressing the underlying issue of health-care spending growth. Doing that requires some combination of supply-side interventions (such as payment reform) and demand-side interventions (including policies that affect premium contributions or cost-sharing at the point of service).