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Income Inequality And Its Effect On Health Care Spending

(Note: After a five month absence from posting comments, I offer this observation, with more to come. There’s much to do.)

The message resonating from the Wall Street protesters is that income inequality doesn’t work. And among the developed nations, theUS is the most unequal. This distinction does not come without cost. The greatest, of course, is the social cost borne by those who are poor. But what the protesters may not fully realize is that another is the high costs of health care. This is because the costs of caring for the poor are much greater. And together with the rising numbers of poor patients, they are crushing the health care system.

This notion may seem shocking, since it is generally believed that low-income patients receive less health care. After all, many have little or no health insurance, and most have poor access to primary care. Isn’t it the wealthy whose access is best and who use the most? The answer is yes to the first, but no to the second. Access is better for the wealthy, but they use less because they need less. They have better underlying health, and they have social environments that are more conducive to attaining and sustaining health. It is the poor whose health status is poorest and whose needs are greatest.

That doesn’t mean that the care they receive is always efficient, timely or convenient. Nor that it is as effective as the care received by more affluent patients. Inequality exists throughout. But the principal inequality is in their underlying health status. It is worse among the poor, and only some of the difference can be narrowed, even with the best care.

The reasons are well known. They begin in early childhood, with poor nutrion, inadequate education and unhealthy behaviors, often accompanied by physical and emotional abuse. The impact of these early experiences often persists into adult life, where the web of causation expands to include inadequate housing and transportation, poor access to proper foods and weak family and social support systems. Their effects become magnified in dense urban environments, with their complexities, segregation, discrimination and threats to personal safety, and further compounded by chronic unemployment.

It is not surprising, therefore, that the poor have more disease and disability, both physical and mental. Nor should it be surprising that, as a result, they have more and longer hospital admissions, more readmissions, more out-patient visits and higher health care spending. Yet this added care is still not commensurate with their greater burden of illness, and despite it, the gap in life expectancy between poor and rich continues to widen.

One reason many believe that low-income patients receive less rather than more care is that they did receive less forty years ago, both in the US and Britain. It was not until the late 1980s that parity was reached, and health care spending among low-income patients has grown disproportionately ever since. Among Medicare enrollees, the poorest one-fifth now use about 30% more than the richest. This difference is even greater among working-age adults. At the extremes, health care utilization in urban poverty ghettos is more than double the rate of affluent suburbs. Indeed, if utilization throughout such regions were at the levels of their wealthiest enclaves, overall spending would be 25-30% less. This decrement is similar to Sir Michael Marmot’s estimate that about one-third of health care spending in England results from income-inequality.

Unfortunately, some policy-makers have misinterpreted the increase utilization by the poor as wasteful care in regions that use more, and this has led to policies that disproportionately penalize providers who disproportionately care for the poor. The reality is that income inequality leads to high health care spending and that this draw on resources is unsustainable, all the more so as poverty rates continue to rise.

Not all who are demonstrating on Wall Street may have specific recommendations, but the message that I get from them is that a more equitable America would work better. That certainly is true for health care. Costs are higher and outcomes poorer in countries where income inequality is greater, and the US is #1. This is not to say that our system doesn’t have other problems, from over-regulation to over-utilization, nor that better ways to care for the poor cannot be found. What it does say is that, no matter what else is done, the US will not be able to afford the high health care costs of income inequality and that the only durable solution is to deal with the root cause.

*This blog post was originally published at PHYSICIANS and HEALTH CARE REFORM Commentaries and Controversies*


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