By Van R. Newkirk, II, in The Atlantic.

Even with the Affordable Care Act, the premium and payment structure of insurance increases the relative income gap between rich and poor.

For most people, a single doctor’s visit can be a financial obstacle course.

Many patients throughout the year pay hundreds or thousands of dollars in premiums, most often through workplace contributions. Then, at the doctor’s office, they are faced with a deductible, and they may need to pay coinsurance or make a copayment. If they have prescriptions, they’ll likely fork over cash for those, too.

And that’s just for basic primary care for one person. Repeat that process for an entire family; add in any labs, referrals, specialists, emergency-room visits, and surgeries; and the result for even healthy families is dozens and dozens of payments, and often thousands of dollars. This series of expenditures before, during, and after care is euphemistically called having “skin in the game.” But the reality is, the American insurance system is designed to make health care financially unpleasant, often to the point where patients forego necessary care.

A new study in the forthcoming March issue of the American Journal of Public Health sheds light on just how all that “skin in the game” affects the material conditions of patients. The research—by Andrea Christopher at the Boise Veterans Affairs Medical Center, David Himmelstein and Steffie Woolhandler at the City University of New York at Hunter College, and Danny McCormick at Harvard Medical School—indicates that household spending on health care is a significant contributor to income inequality in the United States. It also indicates that medical expenses push millions of Americans below the federal poverty line, including 7 million people who make more than 150 percent of the poverty level. Four million of those Americans are pushed into the ranks of extreme poverty.

That health-care costs in the country are expensive—often, prohibitively so—is well known. As Vox’s Sarah Kliff notes, the first reason why is the exorbitantly high cost of care, which doesn’t always correspond with measurable increases in quality or demand. Even for routine procedures or precautionary visits, hospital bills can run over $400, an expense that almost half of American households can’t meet without dipping into credit. Additionally, billing is famously opaque, incoherent, and fragmented, creating major barriers to informed care decisions and often resulting in bills going into collections.

Health insurance is supposed to mitigate those cost and information barriers. A 2016 Kaiser Family Foundation analysis found that while significant numbers of Americans have trouble paying medical bills, only 20 percent of insured people had difficulty versus half of all uninsured people. Most of that difficulty for both groups comes from sudden medical events or accidents, or sudden life events like the loss of a job. Medical debt is also a major contributor to bankruptcy in the United States. One of the major arguments for the Affordable Care Act was in its name: a promise to help shield people from the worst financial effects of medical catastrophe or chronic illness.

New avenues of subsidized or free health insurance that sprang from Obamacare—including private insurance offered on the exchanges and expanded Medicaid rolls in many states—have been able to do some shielding. The ACA helped reduce total bankruptcies by as many as 1.5 million between 2010 and 2017. The Centers for Disease Control and Prevention reports that, between 2011 and 2016, the percentage of Americans with trouble paying medical bills dropped precipitously. And a 2017 study by the Urban Institute’s Kyle Caswell and Timothy Waidmann found “improved credit scores, reduced balances past due as a percent of total debt, reduced probability of a medical collection balance of $1,000 or more, … and a reduction in the probability of a new bankruptcy filing” for people in Medicaid-expansion states.

But the new AJPH study complicates some of that rosy analysis. The researchers didn’t split the survey population up based on insurance status; they instead measured income inequality across the population, both before medical expenses were taken into account and after. They found that income inequality in 2014 actually increased by 1.5 points after medical expenses were subtracted from income. Put another way, poor people spent much more of their income on health care than the richest people did, and as a result around 1.5 percent of all relative income shifted toward the higher earners.

The researchers also found that medical spending sent millions of people effectively into poverty or into deeper rungs of poverty. Seven million Americans making more than 150 percent of the federal poverty line—$31,000 for a family of three—dropped below that line if medical expenses were subtracted from their income. That meant that these families spent something like a third or more of all their income on health care. Of the 7 million, 4 million found their post-health-care income reduced below 50 percent of the poverty line, meaning they spent about two-thirds of their total income on health care. The study also found that the ACA decreased the amount of inequality caused by health-care expenses, but only slightly.

There are some limitations to how far these results can be interpreted. It’s possible that, since 2014, continued gains in insurance coverage—at least until the uninsured rate rose in 2017—combined with additional states expanding Medicaid, decreased coverage costs; a more recent study would be needed to say for sure. Also, without insurance-enrollment breakdowns, it’s impossible to see where and why the biggest gaps in income inequality emerge, and the exact role the ACA may have played in fixing them.

Still, the study adds to the body of evidence on the dramatic impact of health-care costs. Even with Medicaid as a safety net, health care is a major burden for low-income people—so much so that it deeply exacerbates differences in income and wealth.

One major reason for this burden, perhaps even especially under the ACA, is deductibles. While almost the whole of the national health-care debate has centered on how to lower premiums, the ACA and other health policies have in many cases purposefully driven deductibles upward. More Americans say they have trouble affording their deductibles than they do affording their premiums. Between 2006 and 2017, the Kaiser Family Foundation found that deductibles for people with employer-sponsored insurance increased fourfold. The out-of-pocket maximums on many of these plans also increased sharply. Many of these hikes came from an across-the-board embrace of so-called high-deductible plans, which have been theorized to limit both utilization of health care and the burden of premiums. The tradeoff for those lower premiums is that those who use their insurance have to pay a lot more to do so.

As a 2017 Atlantic investigation showed, this theory can often create two kinds of adverse outcomes when put into practice. Many people simply spend what they need to to cover health-care costs, draining their savings and income as they go. And many who don’t turn to crowdfunding to pay their bills, or go without care in the first place. Technically, these outcomes reduce the number of medical bankruptcies—a victory for policymakers—because even high-deductible plans place a hard cap on medical expenditures.

Yet even as Americans are better protected from the worst consequences of catastrophic illness, routine care continues to hurt low-income people’s finances.

The ACA isn’t really designed to combat that particular paradox. In fact, the law at times embraces it. It juiced up the comprehensiveness of most plans, and it shields people from the true cost of premiums through a number of mechanisms. But in exchange, the structure of the high-deductible plan was accepted as a basic mechanism for both rationing and budgeting. While cost-sharing reductions were introduced to put a cap on the burden that deductibles, copayments, and coinsurance place on low-income Americans, 90 percent of all people on the exchanges still pay deductibles in excess of $1,300 individually or $2,600 per family, amounts that are often difficult to afford even for middle-class families.

Republican plans to create a new health-care regime would, for the most part, only increase that difficulty, because both the Senate and House bills to repeal Obamacare increased deductibles even further. President Trump, meanwhile, has stopped paying cost-sharing reduction payments and signed a tax law that repealed the individual mandate to purchase insurance. Both of these actions could increase premiums, thus giving some patients yet another financial burden to worry about.

The new study functions as a reminder that policymakers seeking to address income and wealth inequality cannot do so without continuing to address health care, still one of the most constant sources of financial woe in American life. That includes both the absolute cost of health care and the myriad ways the cost is passed onto people with insurance. Until those problems are mitigated, having “skin in the game” for the poorest Americans translates to losing financial ground.

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