Health care bills would limit out-of-pocket costs

WASHINGTON -- Consumers would be spared having to pay huge medical bills under Democratic health care legislation that's moving through Congress, as lawmakers agree on the need to put limits on how much people would pay out of their own pockets.

"There will be a cap on annual expenditures, out-of-pocket expenditures," Rep. Steny Hoyer, D-Md., the majority leader in the House of Representatives, declared this week.

Bills pending before the House and the Senate would set different limits, but virtually everyone agrees on a key principle: "You shouldn't go bankrupt" because of your medical costs, said Elizabeth Carpenter, a policy analyst at the New America Foundation, a center-left research center.

According to a study in the August issue of the American Journal of Medicine, increasing numbers of people are going bankrupt because of illness and medical costs. Health-related debts caused 62.1 percent of all bankruptcies in 2007, up from 46 percent six years earlier.

Dr. Steffie Woolhandler, the study's senior author, expects about the same percentage of this year's anticipated 1.4 million to 1.5 million bankruptcies to be caused at least in part by medical expenses.

The increases are caused largely by "health coverage that is getting skimpier and skimpier," said Woolhandler, a professor of medicine at Harvard Medical School.

She was skeptical that the legislation would cause the bankruptcy numbers to drop.

"Yes, the limits would be an improvement," she said, but "if you have diabetes or some other chronic condition, every year you'd still be subject to the cap over and over again."

Lawmakers and other experts say the caps are an important step. "You get a lot of security for very little cost," said Sen. Ron Wyden, D-Ore.

According to the American Journal of Medicine study, out-of-pocket medical costs averaged $17,943 for all medically bankrupt families in 2007 -- $26,971 for uninsured families and $17,749 for those who had private insurance at the outset.

The House bill would cap annual out-of-pocket medical expenses at $5,000 per individual and $10,000 per family starting in 2013. New plans offered through new employers, as well as policies sold through the proposed health insurance exchange, a marketplace where consumers can compare plans and prices, would be subject to limits.

Most employers today offer policies with limits on out-of-pocket expenses. Under Senate proposals, existing employer plans would be exempt from the limits, but the House would require employer plans to have caps in place by 2019.

The Senate legislation would tie the annual out-of-pocket limits to those that exist under current law for health savings accounts, which will be $5,950 and $11,900 in 2010 but should increase by the time new rules would go into effect in 2013 under the proposed legislation.

Out-of-pocket expenses are expected to include co-payments for medical services and prescription drugs, deductibles and co-insurance, though premium payments wouldn't count toward the out-of-pocket maximum.

Once a consumer reached the limit, his or her plan would pay 100 percent of further expenses.

"This is a pretty significant improvement," said Linda Blumberg, an economist at the Urban Institute, a center-left Washington research group.

The health insurance industry disagrees.

"We don't believe a cap is the best way to control rising health care costs," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry trade group.

To curb high bills, he said, "policymakers need to address the underlying cost of medical care, which is the key driver of rising health care costs."

Among most experts and lawmakers, however, the most serious debates are about whether the caps are too high and whether the bankruptcy problem is exaggerated.

"Health care expenses can contribute in some ways to bankruptcy, but whether it's the precipitating factor is more difficult to determine," said Peter Cunningham, a senior fellow at the Center for Studying Health System Change, a nonpartisan research center.

Cunningham thinks that limits on out-of-pocket expenses are necessary to reduce the financial burden of health care on families as deductibles, co-pays and prescription drug costs rise, meaning "a whole lot of lower- and middle-class people face higher medical bills."

There's some concern about whether the combination of premium costs and out-of-pocket expenses could be too much for some consumers.

The House and Senate bills propose a complex system of premium subsidies, generally for people with incomes up to 400 percent of the poverty level, or about $88,000 per family. The subsidies would be offered on a sliding scale.

For instance, according to Kaiser Health News, under the Senate Finance Committee bill a family of four in which the 45-year-old policyholder heads a household with a $50,000 income would pay $4,169 annually for basic coverage after receiving a government subsidy of $6,911.

Would it be too burdensome, however, to add that $4,169 to another $10,000 to $11,900 for medical expenses?

Such judgments are what Congress is wrestling over.

"That's a big issue. You're looking for a balance," said David Certner, the legislative policy director at AARP, which represents seniors.


Dr. Steffie Woolhandler testimony on medical bankruptcy

Health care expense study

Pew Center poll on health care

Side-by-side comparison of health care bills

Congressional Budget Office analysis of House health care plan


Moderate Democrats hold health bill's fate in their hands

Reid includes public option in latest health care bill

Americans cutting back on health care to save money

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