The Hidden Costs of U.S. Health Care for Consumers

When most people think about health care, doctors, hospitals, insurance premiums and prescriptions come to mind. But spending often goes beyond that — to purchases that are outside of conventional therapies and treatments and home care for family members. Taking all of these expenses into account, a recent study by the Deloitte Center for Health Solutions and the Deloitte Center for Financial Services found that consumers spent $363 billion, or 14.7 percent, more for health care goods and services in 2009 than is captured in official government accounts.

Tune into this episode of Deloitte Insights to learn more about the study and what it reveals about this substantial and increasing burden in the average household.

Speaker

Paul Keckley, Ph.D, Executive Director of the Deloitte Center for Health Solutions

Transcript 

Sean O’Grady, Host, Deloitte Insights:  Hello and welcome to Insights. Today, we’re diving into the details of a study from the Deloitte Center for Health Solutions and the Deloitte Center for Financial Services that investigates the historic trends in U.S. consumer purchasing of health care goods and services, and here in the studio to explain some of the those key findings is Paul Keckley, a PhD of Health Economics and Executive Director of the Deloitte Center for Health Solutions. So, Paul, why do this study now, what’s the value? 

Paul Keckley: Well, obviously for the past two years, health care has been a pretty topical issue and a theme in that has been what cost consumers bear as part of the overall health care system, so (A) we wanted to get a baseline understanding of what people spend out of pocket and what the system costs but (B) looking forward, consumers will bear more responsibility. All of the trends, regulations, and issues suggest that consumers will bear much more direct responsibility outside their insurance, so we felt it necessary to really dig deeply and get a baseline understanding and that’s what we did. 

Sean: Now, we have a few graphics that we’ve developed for the audience about the study. Let us just begin with what is the total U.S health care expenditure in 2009? 

Paul: Well, the government would normally say it’s around $2.5 trillion, but, as it turns out, it’s $2.8 trillion, and the reason our number is higher than what’s normally reported…but if you think about it, Sean, a lot of folks when they think about health care, they think doctors and hospitals and insurance premiums and prescription drugs and devices, but I’ll bet you’ve spent some money in drug stores buying things to take care of the health care problem. I’ll bet you or a member of your family are taking care of some other people outside your family for home care or other services. So what we did is we, in a very iterative, way added up all of those costs, and we found there were about $363 billion that the government was not including that needed to be included in the data, so that’s where we ended up at $2.8 trillion. 

Sean: Now, we have a pie chart up here for the audience too. Talking about these breakdowns, where was this money being spent? 

Paul: Well, you know you can always imagine that the hospital is going to  be the biggest chunk because that’s going to have high sticker prices, and doctors and professionals services would be the two big buckets, but what people might be surprised, for instance, is how much money is spent in long-term care, which is things like nursing homes and assisted living and things like that. You’ll see on this chart, complementary and alternative practitioners, now that term throws people off, but it’s basically nonconventional deliverers of care, so massage therapy, acupuncture, even a lot of the holistic, non-allopathic methods of care, which by the way is the fastest growing component of this, that people are choosing to go nontraditional, and so you can see in that chart a large amount of money spent in new areas and supervisory care, the largest of these previously uncaptured, and that’s the care for people that need health care services that they can’t afford, so a member of their family or a close friend pays that for them. So that is supervisory care, a $199 billion of that $363 [billion], but you can see all of these are things that hit every household to varying degrees, and what we found surprising is widespread. It cuts across every socio-demographic that beyond what insurance covers and what traditionally you pay as co-pays, deductibles, premiums. There’s a whole new set of expenditures that consumers bear every day. 

Sean: Now, we’ve got another pie chart available for the audience. This one is a breakdown on the entire $2.8 trillion in terms of per capita expenditures. Can you explain this one? 

Paul: Well, it all boils down to how much a $2.8 trillion system costs in your household, in your personal circumstance, and what we did is we dug deeply into how this varies by the income of the household, by various age cohorts, by insurance that people might have. So the aggregated number is that it’s $9,217 per person in this country. But think about that as a family of four. Is the health care system in your household worth $36,800 because that is the number? And obviously if a couple of those are kids are under 18, they’re probably not paying their $9,200, that’s something mom and dad are probably paying. So $9,217 is the per capita, but it is distributed across the population very unevenly, high disproportionate expense of seniors, and it’s distributed unevenly about what’s spent in that, so that’s the pie chart you see there and you can see as you’d imagine, hospital is a big chunk, 23 percent, but in any given year, less than 10 percent of the population are in a hospital, so that’s why the data becomes very meaningful when you look into various types of circumstances and then you look at the data. 

Sean: So, Paul, we have one graphic left for the audience and you were talking about the $9,200 roughly per person as what they pay each year for health care but people have insurance. Insurance has got to pick up some of that cost, so how much are people really paying out of pocket? 

Paul: Well, per capita $1,892 or almost 21 percent of the total spend is out of pocket, but again when you look at the data, it varies, so higher amount of money out of pocket for prescription drugs if you are senior or if you are senior, you are spending more out of pocket on even co-pays for hospital care. So $1,892 is a big number and again let’s go back to that family of four. Even after insurance is that family spending the equivalent of $7,600 after taxes out of pocket for health care? That’s a big number. With the average household income in this country right at $50,000, you’re talking about 21 percent of their disposable income. So this catches people by surprise that so much of what we spend is in health care now. 

Sean: Well, if you can measure it, you can make it better, so thank you very much for the results of that study. Paul Keckley, a PhD in Health Economics and Executive Director of the Deloitte Center for Health Solutions, thank you very much for being with us. 

Paul: Thank you. 

Sean: If you’d like to learn more about Paul or this study, you can find it on our website – that’s www.deloitte.com/us/podcasts. For all the good folks here at insights I am Sean O’ Grady. We will see you next time.