Rita Blue earns $10,000 per year for her family of 4. She develops pneumonia, and her out-of-pocket health costs come to $1,000, 10% of her family income.
Cathy White earns $100,000 per year for her family of 4. She develops pneumonia, and her out-of-pocket health costs come to $1,000, 1% of her family income.
Out-of-pocket payments are a regressive mode of financing. According to the 1987 National Medical Care Expenditure Survey, out-of-pocket payments took 12% of the income of families in the nation’s lowest-income quintile, compared with 1.2% for families in the wealthiest 5% of the population (Bodenheimer & Sullivan, 1997). This pattern is confirmed by the 2000 Medical Expenditure Panel Survey (MEPS, 2003). Many economists and health policy experts would consider this regressive burden of payment as unfair. Aggravating the regressivity of out-of-pocket payments is the fact that lower-income people tend to be sicker and thus have more out-of-pocket payments than the wealthier and healthier.