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The costs of health care products and services continue to rise briskly, significantly outpacing currently low inflation rates. According to the U.S. Department of Labor, the average household’s spending on health care after inflation has been rising by about 1.4% each year. Retirees have been particularly hard hit, with inflation-adjusted out-of-pocket costs rising by more than 2% each year as a result of increased spending on prescription drugs.

While insurance is the most common form of payment for healthcare services, increasingly customers are paying for their own expenses. Pharmaceutical, device and diagnostic companies, should recognize that a part of their revenues are originating directly or indirectly from out of pocket expenditures. Unique financial services have been created to facilitate non-insurance-paid health care services, and more are expected to be created in the near term.

This report, Out of Pocket Healthcare 2011 focuses on those costs of health care which are not paid for by government or private insurance. Once a small percentage of costs of the health care system, the percentage borne by the consumer is increasing steadily. Included in the report is:
• Estimates of the Current ‘Out of Pocket’ Healthcare Market and Forecasts to 2015.
• Breakdown of Spending by Type (Elective, Hospital, Emergency Room, Dental, Vision Outpatient, Prescription Drugs, Office Based Visit, Other)
• Health Care Reform and Its Impact on Out of Pocket Spending
• Statistics For the Types of Consumers Most Likely to Pay Out of Pocket
• Drivers of the Out of Pocket Trend and Potential Limiters
• Overview of the U.S. Healthcare System, Insured and Uninsured Population.
• The Types of Services and Products Purchased with Out of Pocket dollars
• Overview of the growing Healthcare Finance market and a look at key competitors.

The economic recession of December 2007 to October 2009 represented a major downturn that led to broad-based cost-cutting, rising unemployment and reduced disposable income. The impact of the pullback – which some experts compared to the Great Depression of 1929 to 1934 – cannot be overstated. Kalorama Information looks at what change has resulted in out of pocket expenditure for healthcare as a result of the recession and weak recovery.

As part of Kalorama Information’s trusted process, secondary research from government, medical and industry sources was utilized along with interviews with industry experts in the healthcare finance industry.

In Weak Recovery, Consumers Bearing More of Healthcare Costs

Healthcare costs paid out-of-pocket by consumers have increased steadily in recent years, but according to Kalorama Information, the recession and weak recovery are additional drivers for the trend. In fact, the independent healthcare market research firm has found in its new report, Out of Pocket Healthcare Spending 2011, that out-of-pocket healthcare spending was $303 billion in 2010 and the rate of growth will accelerate at 8% annually in the coming years.

According to the U.S. Department of Labor, the average household’s inflation-adjusted spending on healthcare has been rising by about 1.4% each year. Retirees have been particularly hard hit, with inflation-adjusted out-of-pocket healthcare costs rising by more than 2% each year as a result of increased spending on prescription drugs.

“The recent recession brought with it a high unemployment rate, exacerbated by increased outsourcing of jobs to lower cost countries, broad-based cost-cutting and reduced disposable income,” said Bruce Carlson, publisher of Kalorama Information. “Meanwhile, affordable healthcare has become less available but more necessary.”

The costs of healthcare products and services continue to rise briskly; in some cases, they have become astronomical. For example, in 2010, average annual healthcare premiums for a family of four ($13,770) approached annual earnings at the federal minimum wage ($14,500). As a result, Kalorama notes that managed care organizations are increasingly shifting the burden of healthcare costs to consumers by way of increased co-pays and premiums.

About 70% of consumers’ out-of-pocket healthcare spending goes to premiums. And this is increasing as HMOs and employers engage in cost shifting. Co-pays make up a little over 3% of spending, which Kalorama also expects to increase due to cost shifting. Another 27% of out-of-pocket spending goes to direct payments.

The Health Care Reform of 2010 has significantly changed the landscape of the U.S. healthcare industry by extending healthcare coverage to approximately 32 million previously uninsured people. Although this could potentially decrease some demand for out-of-pocket spending from the previously uninsured, it may in fact, raise awareness of the value of basic care and bring more persons into the medical system, thus potentially increasing spending as newly insured consumers take a renewed interest in their health and wellness.

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