Increased Connecticut Health Care and Medical Costs

Mounting Burden -- More Families Face Catastrophic Health Care Costs

As premiums increase and plans offer thinner benefits, working families are shouldering a growing share of health care costs. For many workers, this burden is becoming too great. Higher out-of-pocket costs and health insurance plans that offer fewer benefits leave many families struggling to pay medical bills when health care is needed. This is exacerbated by the fact that earnings have failed to keep pace with rising costs. As a result, a growing share of working families faces catastrophic medical costs.

Approximately 50.7 million non-elderly Americans with insurance are in families that will spend more than 10 percent of their pre-tax income on health care costs in 2008, ¹³ and more than one-quarter of insured Americans report problems with medical bills or say that they are in the process of paying off medical debt. ¹⁴ The problem is even greater for individuals with health plans that offer thinner coverage, such as those that require higher deductibles. ¹⁵ Families whose medical expenditures total 10 percent or more of their income or whose plans include deductibles greater than 5 percent of income -- known as the "underinsured" -- are at particular risk. For underinsured families, medical bills have a profound effect on their health and financial security. More than half (53 percent) of underinsured adults went without needed care (such as skipping a test or treatment recommended by a doctor or not filling a prescription) because of cost in the last year. ¹⁶ In addition, nearly half (45 percent) of underinsured adults had a medical bill problem in the last year.¹⁷

When the burden of high medical costs becomes too great, working families often have no choice but to consider drastic changes in lifestyle and, eventually, bankruptcy. Before resorting to bankruptcy, working families do all that they can to prevent financial ruin. One study found that, in the two years prior to filing for bankruptcy, more than 40 percent lost telephone service, approximately one-fifth went without food, and more than one-half went without needed medical or dental care because of the costs associated with this care. ¹⁸ If these choices are not enough to avert financial ruin, bankruptcy often becomes the only option. More than half of bankruptcies are now due, at least in part, to problems with medical costs. ¹⁹

Medical Debt and Uninsurance -- A Vicious Circle

Illness, high medical costs, and the resulting financial insecurity form a vicious circle. Illness drives increases in medical costs that, in turn, lead to financial difficulties. ²⁰ Concurrently, workers facing illness are often forced to reduce the hours they work and may lose their jobs completely. As medical costs rise, earnings often drop, resulting in greater financial insecurity. Moreover, individuals forced to leave their jobs due to illness may lose their employment-based insurance. Faced with the loss of insurance, families with mounting medical debt are drawn deeper into financial turmoil.