Catastrophic Spending

The ACA granted insurance for millions of people, but insurance is not enough when insured people can’t afford healthcare.

a graph of a number of people

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The US spends more on healthcare than any other country. While people without insurance struggle with exorbitant health care costs, those who have insurance pay excessively out-of-pocket. This phenomenon, where someone has insurance but is not protected from large medical bills, is called underinsurance.

The Affordable Care Act represents the US health care system’s most significant regulatory overhaul since the passage of Medicaid and Medicare in 1965. As such, we are still learning how the ACA shifted the US health insurance landscape. As part of this work, Liu and team analyzed changes in catastrophic health expenditures under the ACA. The team defined catastrophic spending as when someone’s insurance and medical costs exceed 40% of their income after food and housing.

After the ACA, 2.4 million fewer US adults experienced catastrophic expenditures each year. The ACA reduced the uninsured population by about 20 million people through the Marketplace, Medicaid expansion, and extending family coverage to age 26. As the graphic shows, the ACA substantially decreased the number of uninsured people with catastrophic expenditures.

That’s great news and evidence that the ACA delivered its principal aim to improve financial protection for low-income Americans. The passage of the ACA did not, however, decrease catastrophic spending for low-income residents with private insurance. One-third of privately insured low-income adults experience catastrophic spending each year, pointing to the growing problem of underinsurance.

Roughly 11 million US adults experience catastrophic health expenditures annually. The Covid-19 pandemic is projected to make 2020 the worst year of catastrophic spending on record; millions of people have lost their jobs and insurance and many have required unexpected medical care. The ACA granted insurance for millions of people, but insurance is not enough when insured people can’t afford healthcare. Health reform needs a dual focus on insuring the uninsured and addressing the high cost of healthcare among the insured.

Databyte via Liu C, Chhabra KR, Scott JW. Catastrophic Health Expenditures Across Insurance Types and Incomes Before and After the Patient Protection and Affordable Care Act. JAMA Netw Open. 2020;3(9):e2017696.