Income Shocks and Out-of-Pocket Health Care Spending: Implications for Single-Mother Families

Irina B. Grafova, Alan C. Monheit & Rizie Kumar

Publication Date: 07/06/2021

Abstract

We examine how out-of-pocket health care spending by single-mother families responds to income losses. We use eleven two-year panels of the Medical Expenditure Panel Survey for the period 2004–2015 and apply the correlated random effects estimation approach. We categorize income in relation to the federal poverty line (FPL): poor or near-poor (less than 125% of the FPL); low income (125 to 199% of the FPL); middle income (200 to 399% of the FPL); and high income (400% of the FPL or more). Income losses among high-income single-mother families lead a decline in out-of-pocket spending toward office-based care and emergency room care of $119–$138 and $30–$60, respectively. Among middle-income single-mother families, income losses lead to a $30 decline in out-of-pocket spending toward family emergency room care and a $45–$91 decline in mother’s out-of-pocket spending toward prescription medications. Further research should examine whether these declines compromise health status of single-mother family members.

Introduction

Since 1960, the percentage of children living with single mothers has increased by two and a half times. In 2019, single-mother families represented nearly 30% of all families with children (Census Bureau, 2019). Living with a single mother is the second most common family arrangement for children and has important implications for family welfare. Single-mother families face an increased risk of poverty and economic disadvantage (Barardehi et al., 2020). For example, in 2018 about 39% of single-mother families were in poverty compared to 8% of two-parent families (Semega et al., 2020). Among workers, single mothers are the most likely to be in poverty, and are more likely than mothers in two-parent families to be uninsured (Henry J. Kaiser Family Foundation, 2020). Economic disadvantage and lack of health insurance lead to a higher rate of unmet healthcare need in single-mother families compared to two-parent families (Hayes & Hartman, 2011; Irvin et al., 2018).

The Patient Protection and Affordable Care Act (ACA) enacted eleven years ago expanded health insurance coverage, prohibited plans from rescinding coverage, and from imposing annual and lifetime limits on health benefits. The ACA also introduced income-related premium and cost-sharing subsidies as well as required coverage for essential health benefits. Despite these provisions, the ACA failed to reduce the share of American families struggling to pay for health care out-of-pocket (Himmelstein et al., 2019; McCarthy-Alfano et al., 2019).

Most recently, the adverse economic impact of the COVID-19 outbreak has compromised family economic security and the ability of all families to pay for medical care. Prior to the COVID-19 outbreak, about half of adults reported that they or their family member had delayed or gone without care during the past year because of high out-of-pocket costs (Kirzinger et al., 2019). As of August 2020, 42% of all families reported a job or income loss because of the pandemic (Parker et al., 2020) resulting in an additional 11% of adults reporting that they or their family member have problems paying for medical care due to the coronavirus outbreak. The share of families reporting problems paying for medical care since the beginning of the coronavirus outbreak is higher among families with lower incomes. For example, 19% of families with an annual income less than $39,800 report problems paying for medical care since the coronavirus outbreak compared to 10% of families with an annual income between $39,800 and $119,400 (Parker et al., 2020).

Difficulties paying for health care may result in postponing or foregoing care. Overall, about 7% of adults reported forgoing care due to financial concerns during March through mid-July 2020 (Anderson et al., 2021). Among adults reporting missed prescription medications during this period, nearly a quarter cite financial reasons (Anderson et al., 2021).The effects of high out-of-pocket costs on both population health (Karaca-Mandic et al., 2014; Zan & Scharff et al., 2018) and family financial well-being (Hackney et al., 2018; Shin & Kim, 2018) have been a key concern among researchers and policymakers. Several studies find that families respond to income losses by decreasing out-of-pocket spending (Ganong & Noel, 2019; Karaca-Mandic et al., 2014). However, very few studies (Grafova et al., 2020b) are devoted specifically to how health care spending decisions in single-mother families are affected by income changes. Most of the existing literature devoted to single-mother families either finds that living in a single-mother family is associated with low income and high poverty rates, or links living in single-mother family to adverse physical and mental health outcomes (Bzostek & Beck, 2011; Langton & Berger, 2011).

One of the important findings from the relatively sparse literature devoted to how income losses affect single-mother family health care spending decisions is that single mothers are willing to absorb a decline in family healthcare spending in order to preserve the health care use of their children. Single mothers respond to an income loss by decreasing the share of total family health care spending allocated to themselves and increasing the share of total family health care spending allocated to their children. For example, a decline in income from high-income status (income at least four times the federal poverty line) to near-poor income status (incomes between 100% to less than 125% of the federal poverty line) for such families yields a statistically significant increase of 12 percentage points in the share of family spending for total ambulatory care going to children, and a 10 percentage point increase in the share of family spending for office-based physician care going to children (Monheit et al., 2020). A decline from middle-income status (incomes between 200 to 399% of the federal poverty line) to near-poor economic status (incomes between 100% to less than 125% of the federal poverty line) results in a 10 percentage point increase in children’s shares of family health spending for all ambulatory care services, and a 7 percentage point increase in children’s chare of family prescription drug spending.