hink about your income, your family budget, and your health care expenses. How much can you reasonably afford to spend on your health care?
If you’re like most Americans, the odds are high that the number you came up with is vastly lower than the amount the federal government says you can afford. This should be of great concern to former pharmaceutical executive Alex Azar, President Trump’s nominee to lead the Department of Health and Human Services. He would be wise to address exactly what constitutes affordable health care during his upcoming confirmation hearings and, if confirmed, as the next HHS secretary.
Earlier this year, my organization, the Texas Medical Center Health Policy Institute, worked with a national firm to survey more than 9,000 individuals across 15 states to gauge their views of the health care system. More than 98 percent of respondents said they want insurance for themselves and their family. The so-called “invincibles” in their 20s and 30s who say they don’t need health insurance are few and far between. Virtually everybody wants and sees the value of health insurance.
The problem, of course, is that many of them can’t afford health insurance. That’s not a surprise. When the drafters of the Affordable Care Act wrote the law eight years ago, they emphasized “inexpensive” premiums. Well, the premiums were affordable for some (and fewer as the years went on), but the law did not focus on the deductibles — the amount consumers have to spend before their insurance really kicks in — for all but the lowest-income people. Those deductibles, well over $6,000 for some plans offered on the ACA exchanges, when combined with high premiums are why insurance is seen by the public as unaffordable.
Affordability matters. If insurance were more affordable, much of the debate about the future of health care would be moot. Conservatives’ concerns about the increasing cost of entitlement programs, or about the onerous nature of ACA mandates, would largely disappear as more Americans would simply purchase affordable insurance on their own.
The only way that could happen is if lawmakers understood what “affordable” health care really means to everyday people. To find out, we asked the 9,000 consumers in our survey. Specifically, we asked people in the survey who did not have health insurance what percentage of their income they considered an “affordable” amount to spend on health care expenses, including the premiums and deductibles they pay as well as other out-of-pocket expenses, such as drug copays.
Well over half of the uninsured respondents said that 2 percent of income was an affordable amount to spend on health care; that included 60 percent of those earning at least $75,000 per year. We also saw similar results for respondents who had health insurance.
Cynics have argued that if people gave up luxury items — the latest cellphones, fancy televisions, luxury cars — they could afford to spend more on health care. Our survey data show that’s not the case. Half of our respondents, whether they were insured or not, said they had to make significant cuts just to pay for health care. Across all incomes, they cut back in three areas to pay for health care: savings, clothing, and food. It’s a troubling trend, given that most Americans have less than $1,000 in their savings accounts. For them, health care isn’t just a health issue — it’s an economic issue.
Rarely in the years since the ACA was enacted, including during recent attempts to repeal and replace the law, has consideration been given to what people can actually afford. And the current law is out of touch with consumers.
The ACA’s individual mandate requires people to obtain health insurance or pay a penalty. Those who lack access to “affordable” coverage under that law are exempt from that penalty. But under the ACA, coverage is considered affordable only if it doesn’t cost more than 8.2 percent of income.
For a family earning the median household income of $59,000, that would mean a $4,800 premium. Add in a $6,000 deductible — typical of many ACA exchange plans — and that comes out to nearly 20 percent of the family’s income.
Consumers and lawmakers aren’t speaking the same language when they talk about affordable health care.
We know that the ACA has big problems, and something needs to change. But as federal policymakers continue to debate the future of health care, the question of affordability has been missing from the conversation. I hope Azar will help bring this issue to the forefront.
It makes no sense to create an arbitrary definition of “affordable.” As our lawmakers get back to work on health care — as they must — they should consider what it really means.
Arthur “Tim” Garson, Jr., M.D., is a pediatric cardiologist, director of the Texas Medical Center Health Policy Institute in Houston, and adjunct professor of management, policy, and community health at the University of Texas School of Public Health.