Out-of-pocket expenses are opportunity, burden for healthcare delivery

January 10, 2013

Price sensitivity will escalate as consumer costs rise, reports the Deloitte Center for Health Solutions.

The consulting behemoth’s recently released study, titled “The hidden costs of U.S. health care: Consumer discretionary health care spending,” details increasing out-of-pocket expenditures by consumers on healthcare services and products. Although the trend could represent an opportunity for providers as consumers look to become increasingly involved in their healthcare decisions, it could induce other segments of the population to avoid or defer care, thereby increasing expenditures long-term.

Deloitte’s report analyzed $3.2 trillion in healthcare expenditures for 2010 and estimates that $600 billion was racked up in direct and indirect costs, which is not calculated by the National Health Expenditure Accounts. As part of this segment, out-of-pocket expenses represented $402 billion in 2010, and professional services accounted for 24% of the total, followed by retail products and services (10%), long-term care (10%), prescription drugs (8%), and hospital care (4%).

According to Deloitte, spending patterns “demonstrate interest in health/wellness products and health maintenance, increasing involvement of consumers in their healthcare decisions.”

Nearly $492 billion was spent on supervisory care, which was defined as the unpaid care provided at home by family or friends.

“The hidden burden of supervisory care is substantial and has significant implications for employers, consumers, and the healthcare sector,” the report adds. In fact, as prices continue to rise, policymakers need to understand the implications. “Consumer price sensitivity about providers, prescription drugs, and health insurance plans is likely to increase as costs continue to rise and more of the burden is borne by the consumer through out-of-pocket spending.

“Rising costs may induce consumers to avoid or defer care, potentially leading to poorer health and more expensive outcomes in the future,” the report warns.

Policymakers should address the intended and unintended consequences of direct and indirect health costs, Deloitte adds.

Some other findings from the study:

  • Physician and clinical services captured nearly $516 billion in 2010.

  • Expenditures for physician and clinical services were nearly 37% less than the $814 billion spent on hospital care.

  • Hospital care is the largest expenditure for all income groups.

  • 35% of all healthcare spending is done by people living in families with annual incomes of <$25,000.

  • Healthcare costs for seniors represented 37% ($1.19 trillion) of total healthcare spending.

  • Growth in professional services was 5.9% in 2006 but just 3% in 2010.

  • Spending growth slowed for other healthcare categories, too (hospital, long-term care, retail products and services, prescription drugs, and supervisory care) from 2006 to 2010.
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