Infographic

The bottom 10 percent of income earners spent almost half of their income on medical expenses, while the top 10 percent of earners spent less than 3 percent. The disproportional health burden contributes to the increasing income inequality this paper found.

The U.S. health care system is nothing short of an enigma to most. From challenging vocabulary to changing policies, it is difficult to understand whether or not the system in place is actually benefiting those in need. 

A recent study by Andrea Christopher, an acting instructor at UW Medicine, along with David Himmelstein and Steffie Woolhandler, professors of public health and policy at City University of New York at Hunter College, showed that the Affordable Healthcare Act (ACA) helped decrease income inequality by reducing out-of-pocket expenses for low-income people. 

The researchers used the Gini index, which measures income inequality and wealth distribution on a zero to one (zero percent to 100 percent) scale where zero represents perfect equality and one indicates one person receives all the income. The Gini index number increased from 2013 to 2014, but the index number with subtracted medical costs decreased slightly over that timeframe, which the authors attribute to healthcare coverage for lower income families.

Medical costs increase income inequality because low-income households that can’t afford health insurance are stuck paying high out-of-pocket expenses. The ACA helped address that by expanding Medicaid, a joint federal and state program that reduces medical costs for members of low-income families, including children, the elderly, women who are pregnant, and patients in nursing homes. 

“What is potentially underlying the findings of this study is that lower income individuals or families because of the Medicaid expansion are able to enroll at medicaid at a greater rate,” said Edwin Wong, a research assistant professor in the UW’s department of health services at.

When separated into categories based on annual income, medical expenses lowered the median income for the bottom 10 percent of low-income individuals by almost half but was still a slight improvement from the previous year. These expenses pushed more than seven million Americans below the poverty line. Medical expenses lowered median income among the poorest 10 percent of people by almost half, compared with only a three percent decrease for the richest 10 percent. 

“The U.S. health care system is highly regressive,” Woolhandler said. “That is, it takes a much bigger share of income from poorer families than from richer families.”  

Unlike some European countries, U.S. health care expenditures are not proportionally split between income brackets. The authors illustrate that $5,000 a year for health insurance is only one percent of a person’s income making $500,000, but it is 10 percent for someone earning $50,000. 

“Unequal access to care remains a major challenge,” Woolhandler said. “Despite the modest successes of the Affordable Care Act, we still have 30 million uninsured Americans.”

Even with a relatively smaller change in the Gini index and increased taxes on the rich, medical expenses in 2014 still redistributed 1.37 percent of total income from poorer to richer individuals. 

While other nations achieve universal health care with tax-based financing, the United States relies on the private insurance industry, which drives up costs and has no obligation to cover families and individuals who can’t afford it. 

“It takes time for individuals to understand the requirements, and it takes time for researchers to understand the true effects,” Wong said. “Sometimes the effects are difficult to understand for researchers.”

With the federal government currently attempting to repeal and replace the ACA, the estimated 17.6 million Americans who gained insurance from the ACA could be looking at greater health care costs. 

“It is a bit of a moving target,” Wong said. “There have been a lot of things that have been proposed but sort of in the general, policies, or any potential modifications to ACA that mitigate the level of coverage for Medicaid.” 

Recent health care policy has been shaped by the ACA, but it’s important to look back at the effect it has had on not only our health, but also the distribution of wealth in America. While it did help slow the concentration of wealth at the top, income inequality continues to rise and medical expenses push millions of people into poverty each year. 

 

Reach reporter Vidhi Singh at science@dailyuw.com Twitter: @vidsvida

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