Redistribution Of Health Care From The Poor To The Wealthy

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Health Spending For Low-, Middle-, And High-Income Americans, 1963–2012

By Samuel L. Dickman, Steffie Woolhandler, Jacob Bor, Danny McCormick, David H. Bor, and David U. Himmelstein

Abstract

US medical spending growth slowed between 2004 and 2013. At the same time, many Americans faced rising copayments and deductibles, which may have particularly affected lower-income people. To explore whether the health spending slowdown affected all income groups equally, we divided the population into income quintiles. We then assessed trends in health expenditures by and on behalf of people in each quintile using twenty-two national surveys carried out between 1963 and 2012. Before the 1965 passage of legislation creating Medicare and Medicaid, the lowest income quintile had the lowest expenditures, despite their worse health compared to other income groups. By 1977 the unadjusted expenditures for the lowest quintile exceeded those for all other income groups. This pattern persisted until 2004. Thereafter, expenditures fell for the lowest quintile, while rising more than 10 percent for the middle three quintiles and close to 20 percent for the highest income quintile, which had the highest expenditures in 2012. The post-2004 divergence of expenditure trends for the wealthy, middle class, and poor occurred only among the nonelderly. We conclude that the new pattern of spending post-2004, with the wealthiest quintile having the highest expenditures for health care, suggests that a redistribution of care toward wealthier Americans accompanied the health spending slowdown.

From the Discussion

The slowdown in health spending growth between 2004 and 2013 was widely reported and much celebrated. Our data suggest a sobering interpretation: Slower spending growth (at least through 2012) was concentrated among poor and middle-income Americans, leading to a growing disparity in health expenditures across income groups. It is unclear whether the recent acceleration of spending growth will reverse this trend.

The pattern of sharply rising spending for the wealthy and flat or slow growth for others mirrors the widening gap in the consumption of other goods and could represent a shift from need-based to income-based receipt of medical care. We fear that it might presage deepening disparities in health outcomes.

Prior to the implementation of Medicaid and Medicare in 1966, the poor had the lowest health expenditures despite their greater medical need, while expenditures for the wealthy were nearly twice as high as those for the poor. Subsequent to these public investments, health spending tracked closer to medical need, with the poorest income quintile having the highest expenditures and the top quintile the lowest. (However, after adjustment for age and health status, the health expenditure gap between income groups was never fully reversed.)

The rising income-based disparity in spending suggests a shift from allocation of health care according to need to allocation by willingness (and ability) to pay. It is unclear whether this shift arises from the underuse of needed care among the poor or overuse of unnecessary care by the wealthy. The sharp spending increase among the nonelderly top income group merits further study and could be caused by the widening gap in cost-sharing requirements in private insurance plans for employees of small versus large firms (the latter of which tend to pay higher wages), the rise of concierge medical practices, or supply-induced demand. Irrespective of the cause, the pattern suggests that the efficiency of medical spending is declining, with an increasing share of medical resources devoted to people with the least medical need.

Conclusion

Increasing income inequality has drawn much attention in recent years. Our findings suggest that inequality in health care spending is also on the rise: Expenditures for the poorest (and sickest) segment of the population are actually falling, while those for the wealthy are growing rapidly and now exceed those for other Americans. This pattern, which has not been seen since before Medicare and Medicaid were introduced, could portend a widening of disparities in health outcomes.