A new report from the Deloitte Center for Health Solutions estimates that the total of all U.S. health-related expenditures in 2010 totaled $3.2 trillion or about 23 percent higher than reported in the National Health Expenditure Accounts (NHEA).
In its report, “The hidden costs of U.S. health care: Consumer discretionary health care spending,” Deloitte researchers take a broader look at health-related expenses than the NHEA, which is produced yearly by the Centers for Medicare & Medicaid Services' Office of the Actuary. For the fuller scope of total health spending, Deloitte considers both direct and indirect costs and also includes other items such as alternative medicines, functional foods and the imputed cost of supervisory care.
As the Deloitte researchers explain it: “Health care spending in the United States consists of that reported by the National Health Expenditure Accounts (NHEA) and the ‘hidden costs of health care’ – spending that occurs outside of the NHEA and is not routinely or completely captured.”
In all there was an additional $621 billion in direct and indirect health costs in 2010 than was captured by NHEA accounting. Of that amount, $492 billion was the estimated value of uncompensated supervisory care provided to people by family or friends.
Supervisory care is care delivered by family members or members of the community to chronically ill or disabled people in their homes that otherwise would have been delivered by a nursing home or a home health agency. Deloitte’s imputed cost analysis of unpaid supervisory care of $492 billion dwarfs the actual amounts spent on nursing homes ($143 billion) and on home health care ($70 billion).
Supervisory care was almost exclusive to lower income households, with two-person households and seniors the most likely to be providing this kind of care.
Out-of-pocket (OOP) costs were also captured by the report’s authors. OOP costs are taking an increased bite out of consumers’ pocketbooks. The most common areas for OOP spending were professional services (24 percent), retail products and services (19 percent), long-term care (10 percent), prescription drugs (8 percent) and hospital care (4 percent).
Direct and indirect OOP spending on health was highest among seniors. Despite representing only 13 percent of the population, seniors accounted for $440 billion OOP costs, or 37 percent of the total spending. By comparison, those younger than age 25 spent $157 billion (25 percent); those aged 25 to 44 spent $121 billion (22 percent); and 45- to 64-year-olds spent $179 billion (21 percent).
The burden of OOP spending also appears to be falling disproportionately on lower-income households. Thirty-two percent of the money spent on healthcare in the lowest income group is OOP, compared with 24 percent for the highest income families.
The Deloitte researchers noted the discrepancy between income brackets is an area that warrants scrutiny both by businesses and policy makers, alike.
“Explicit efforts should be made to inform consumers about their OOP exposure for traditional purchases,” the authors suggested. “In addition, attention to models and policies that support appropriate supervisory care services for lower-income households is necessary; policy-makers and employers should innovate around programs that reduce workplace absences and lost income for employees adversely impacted by this added responsibility.”
The report also warned that as OOP costs continue to rise, people may be deferring care and, as a result, ending up sicker.
“By understanding where consumers are potentially deferring care (or spending less), hospitals and health plans can better manage population health/risk and contain medical costs,” the report concluded.