Research Activities, September 2013
Information on assets should be incorporated when measuring the financial burdens of health
Health Care Costs and Financing
When assessing the out-of-pocket burdens of health care costs, a person's annual income is used to determine the financial resources available. A person's assets, however, are not included, except for interest and dividends as part of regular income. Yet these assets are particularly important to those who are unemployed or who have high out-of-pocket medical expenses.
Didem Bernard, Ph.D., from AHRQ, and Jessica S. Banthin, Ph.D., of the Congressional Budget Office, investigated how to incorporate assets when determining out-of-pocket health care burdens. One approach is to add a portion of assets to income or annuitize wealth to measure the resources of retired persons. A second approach is to apply different income thresholds to different subpopulations by age.
The researchers used data from the Medical Expenditure Panel Survey. Out-of-pocket burden is defined as the share of family income spent on out-of-pocket expenditures on health care services and premiums for all family members. The median out-of-pocket burden for elderly families was 10.7 percent compared to just 2.9 for nonelderly families. This burden increased to 13.5 percent of family income for elderly families living in poverty.
The researchers found large disparities in the distribution of net assets. The elderly had a median $146,000 in family net wealth, 7 times as much as $20,000 for the nonelderly. Among those living below poverty, elderly families had more than $20,000 in net wealth; nonelderly families reported zero. About 52 percent of the elderly and 17 percent of nonelderly families were spending 10 percent or more of their income on medical care; 26 percent of the elderly and 7 percent of the nonelderly were spending 20 percent or more of their income.
As an alternative measure of resources, the researchers adjusted the incomes of the elderly families to include 5 percent of the value of their total net assets. This shifted the average income up by about $16,000. Among those elderly families living below poverty, the adjustment increased average income from $6,550 to nearly $12,000. This decreased the percentage with medical burdens exceeding 20 percent of income from 44 percent to 29 percent.
The researchers conclude that incorporating assets into the measure of resources is one approach in developing a consistent measure of medical risk in comparing the relative status of elderly and nonelderly subpopulations in terms of health-related financial burdens.
More details are in "Incorporating data on assets into measures of financial burdens of health," by Drs. Bernard and Banthin in Medical Care Economic Risk: Measuring Financial Vulnerability from Spending on Medical Care (Michael J. O'Grady and Gooloo S. Wunderlich, editors), National Academies Press 2012, pp. 267-280.
Reprints (AHRQ Publication No. 13-R035) are available from AHRQ.