September 20, 2011

Contact:
Jenifer Shockley, 404-413-7078
J. Mack Robinson College of Business

Patricia Ketsche

ATLANTA - Georgia State University researchers have released a study on the effects of healthcare costs on low-income families. The new study, funded by the Robert Wood Johnson Foundation and published in the September issue of Health Affairs, states that healthcare costs account for 22.7 percent of spending in low-income families, and just 16 percent in higher-income households.

Patricia Ketsche, associate professor of the Robinson College of Business Institute of Health Administration, and Sally Wallace, professor and chair of the Department of Economics in the Andrew Young School of Policy Studies, co-authored the paper, along with Kathleen Adams, professor at Emory University's School of Public Health and two other researchers.

Ketsche, who is principal investigator on the study, presented the findings at a briefing in Washington, D.C., on September 8.

"Most Americans - most people - don't really realize just how much of their income is consumed by healthcare," Ketsche said. One purpose of the study is to make it clear to families just how much that is and to "trace that money back to their pockets."

For low-income families, out-of-pocket spending for healthcare consumes about 10 percent of annual income. "One reason out-of-pocket is so high for low-income families is because not all are eligible for Medicaid," Ketsche said. Just because a family has low income does not mean it is automatically qualified for Medicaid - the family member has to have another condition, such as being pregnant, being a child, being elderly or being disabled.

Another component of the heavy burden the current healthcare system imposes on low-income families is the state spending for healthcare, especially Medicaid. The study explains that because the states' tax systems rely more heavily on sales taxes, state financing for healthcare tends to be regressive - which means the portion of income a family pays in sales taxes increases as the household income decreases.

"Much of the federal government spending for healthcare is funded by income taxes, which tend to be progressive - that is, that the tax as a share of income is larger for higher income individuals. While state revenue systems used to support healthcare may include income taxes, states are simply more reliant on sales taxes," Wallace said.

The U.S. Census Bureau released the recent poverty rate and median household income numbers Tuesday; the poverty rate increased to 15.1 percent in 2010, up from 14.3 percent in 2009. That's 46.2 million people in poverty in 2010, compared to 43.6 million people in 2009. The median household income in the United States for 2010 was $49,445, a 2.3 percent decline from 2009.

"If healthcare costs keep going up and consume more of our incomes, the problems of the recession are made even worse," Ketsche said, speaking to the decrease in median household income.

The study also discusses the possibility that healthcare reform could shift the burden more evenly across families, in part because the funding system for Medicaid will rely more on federal financing than state financing. More federal financing would mean less regressive taxing. As more and more people become eligible enrollees for Medicaid, the Southern and Midwestern states will be more heavily affected because they will have more new enrollees and because some of them have historically relied more heavily on state sales taxes than on income-based taxes.

In addition, the U.S. Census Bureau reports that "the South was the only region to show statistically significant increases in both the poverty rate and the number in poverty - 16.9 percent and 19.1 million in 2010 - up from 15.7 percent and 17.6 million in 2009. In 2010, the poverty rates and the number in poverty for the Northeast, Midwest and the West were not statistically different from 2009." The U.S. Census Bureau also reports that households in the Midwest, South and West showed declines in median household income between 2009 and 2010 - between a 2 and 3 percent decrease. The change in median household income for the Northeast was not statistically significant.

The healthcare financing study began in late 2008. The other co-authors of the paper were graduate students at Emory University and Georgia State University. The researchers plan to continue to work on the study, saying this is just one piece of a larger project that will include more in-depth analyses and more about how the different U.S. states are affected.

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The largest business school in the South and part of a major research institution, Georgia State University's J. Mack Robinson College of Business has 200 faculty, 8,000 students and 70,000 alumni. With programs on five continents and students from 150 countries, the college is world-class and worldwide. Its part-time MBA is ranked among the best by Bloomberg Businessweek and U.S. News & World Report. Its Executive MBA is on the Financial Times list of the world's best EMBA programs. Located in Atlanta, the Robinson College and Georgia State have produced more of Georgia's top executives with graduate degrees than any other school in the nation.