Improving Value

Health Care Affordability Standards

Health care affordability is consistently cited as a top worry for U.S. residents. In every state, residents report struggling to afford health insurance, delaying or forgoing care due to cost and being unable to pay the medical bills they’ve received. In high numbers and across party lines, people believe the government should address these concerns. 

A major barrier to making progress on health care affordability is that there is no standard definition that can be readily used for policy purposes. In housing policy, the widely accepted, although imperfect, “30 percent rule” states that housing becomes unaffordable when it exceeds 30 percent of a household’s income.¹ Renters become “severely burdened” when housing costs consume 50 percent of income or more.

In health care policy, a widely accepted affordability standard doesn’t exist. Instead, there is a patchwork of affordability thresholds that vary by government programs and a diversity of opinions on the point at which health care becomes affordable. A uniform standard would facilitate policymaking, as well as measuring the effectiveness of various interventions.

Important Considerations

In the past few years, states have begun to address this problem.² To guide this work, we note the following important considerations:

The goal of developing an affordability standard is to remove financial barriers to health care. In light of this goal, an affordability standard should determine the percentage of income a household can devote to health care (in total, and separately for):³

• The cost of coverage (premiums);
• Cost-sharing for covered services; and
• The cost of needed services not included in the benefit package.

Moreover, affordability standards must be grounded in real world data demonstrating how the ability to afford coverage and care varies with income and family size. 

Lessons learned from the variety of affordability thresholds in use across various programs⁴ can help identify where a uniform standard should be set. 

Once a standard has been established, policymakers should harmonize how health care is subsidized across government programs to increase equitable access to care and minimize confusion over eligibility requirements that may prevent people from receiving needed supports.

Finally, a health care affordability standard should be accompanied by bold steps to address the root cause of affordability problems—excess prices—in addition to overprovision of low-value care and insufficient spending on high-value services and social determinants of health that avoid costly expenditures down the line.

 

Notes

1. Herbert, Christopher, Alexander Hermann and Daniel McCue, Measuring Housing Affordability: Assessing the 30 Percent of Income Standard, Joint Center for Housing Studies of Harvard University, Cambridge, M.A. (September 2018). 

2. For an overview of actions taken by Connecticut, Colorado, Massachusetts, Rhode Island and Vermont, see: Hagan, Liz, State Efforts to Standardize Consumer Affordability, United States of Care, Washington, D.C. (November 2019). 

3. Adapted from Barber, Christine, and Michael Miller, Affordable Health Care for All: What Does Affordable Really Mean? Community Catalyst, Boston, M.A. (April 2007). Similar: Community Catalyst and PICO National Network, Voices from the Field: The Case for a Commonsense Affordability Standard, Boston, M.A. (July 2009). 

4. The following programs employ a variety of affordability thresholds that may inform the establishment of a uniform affordability standard: Medicaid, the Children’s Health Insurance Program (CHIP), the Affordable Care Act’s advance payment tax credits and cost-sharing subsidies, past COBRA subsidies, state programs that subsidize coverage and the U.S. tax code treatment of medical expenses. For an in-depth discussion, see: 
McGonagle, Meghan, and Lynn Quincy, Making Healthcare Affordable: Finding a Common Approach to Measure Progress, Healthcare Value Hub, Washington, D.C. (January 2017).