Biden Administration Tackles Financial Strains on Healthcare Consumers

Robert Otto Valdez, Ph.D., M.H.S.A.

Americans have long been facing a healthcare affordability crisis. In response, the Biden Administration has prioritized expanding access to high-quality, affordable healthcare.

Health insurance premiums have grown over the years, primarily due to the rapidly increasing prices charged for care. Between 2016 and 2020 alone, healthcare prices increased at roughly double the rate of general inflation. At the root of these price increases are misaligned incentives across the healthcare ecosystem, including soaring drug prices incentivized by U.S. patent laws and fee-for-service payment models that incentivize the delivery of more services, even if unnecessary, resulting in poorer care quality. Consequently, many individuals and families face financial strain in accessing healthcare.

In a recent article published in Health Affairs, AHRQ researchers highlighted the financial pressures Americans face today. Some families have high out-of-pocket costs for insurance premiums and medical bills. Some face medical debt that they are forced to pay off over years. Others are forced to delay or go without needed medical services because they cannot afford to pay for them. Prior research looked at these issues separately, but for the first time, AHRQ has examined the complete picture of healthcare-related financial distress in America.

More than 40 percent of healthcare spending is financed by private health insurance and out-of-pocket payments. This privately financed portion of total U.S. healthcare expenditures is regressive, falling mainly on those least able to afford it. Therefore, it is not surprising that our analysis finds widespread financial strain associated with healthcare, especially among disadvantaged groups in our society, such as the poor and near-poor.

Among the poor, between 43 and 53 percent face financial strain due to healthcare. Even in families with incomes four or more times above the federal poverty level, financial strain due to healthcare was experienced by between 16 and 35 percent of adults. The American healthcare affordability crisis affects every sector of society.

The Biden Administration has directly taken on this issue of rapidly growing prices for care by aligning some financial incentives within Medicare, expanding Medicaid coverage, and addressing anti-competitive and other harmful practices within the healthcare ecosystem. For example, the Administration is pursuing Medicare initiatives to reduce drug spending. In addition, the Consumer Financial Protective Bureau (CFPB) announced in September that it is beginning rulemaking to remove medical bills from credit reports that have often led to people facing difficulties renting a place to live or prevented families from financially recovering from a medical crisis.

Meanwhile, proposals would end coercive debt collection practices, clean up inaccurate data, and improve predictability of credit scores. In July, the Department of Health and Human Services (HHS), the Department of the Treasury, and the CFPB launched an examination of high-cost financial products such as medical credit cards and installment loans that push up families' healthcare costs and medical debt.

This latter effort builds on the HHS's efforts to protect patients from unfair billing practices and increase healthcare system transparency. Similarly, the Federal Housing Finance Authority rule changes allow medical debt to be excluded from mortgage scores. In addition, many communities nationwide use the American Rescue Plan Act of 2021 to cancel extensive medical debt.

AHRQ's findings highlight the urgent need to address the misaligned incentives across the healthcare ecosystem to improve the quality of care and lower the costs of needed services. Our analysis of the joint distribution of financial burden, medical debt, and financial barriers to needed care illustrates the financial strain that so many working families experience today, especially those with chronic medical conditions like diabetes or substance abuse issues.

Although financial strain is most prevalent among lower-income families, every sector of society experiences the financial strains of healthcare in our Nation. Our findings underpin the Administration's actions and can help policymakers and the healthcare industry confront issues contributing to medical care's financial strain by highlighting key policy and industry practice concerns that can be addressed to make healthcare more affordable.

Dr. Valdez is director of AHRQ.

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