The Economic Burden of Health Inequalities in the United States

EXECUTIVE SUMMARY

We estimated the economic burden of health disparities in the United States using three measures: (1) direct medical costs of health inequalities, (2) indirect costs of health inequalities, and (3) costs of premature death. Our analysis found:

• Between 2003 and 2006 the combined costs of health inequalities and premature death in the United States were $1.24 trillion.

• Eliminating health disparities for minorities would have reduced direct medical care expenditures by $229.4 billion for the years 2003-2006.

• Between 2003 and 2006, 30.6% of direct medical care expenditures for African Americans, Asians, and Hispanics were excess costs due to health inequalities.

INTRODUCTION

On the basis of a compelling social justice argument, government and philanthropy have devoted signifi cant resources to develop research and interventions for addressing inequalities in health status and health care. Th e moral imperative of addressing health and health care inequalities was brought to the forefront of the public consciousness by the release of the Institute of Medicine’s 2002 report, Unequal Treatment: Confr onting Racial and Ethnic Disparities in Health Care. However, while there is a convincing social justice argument for confronting racial and ethnic health inequalities, there are also economic consequences associated with having a large segment of society suff er higher rates of illness and premature death and face inadequate access to quality health care.

Racial and ethnic disparities in health and health care impose costs on many parts of society, including individuals, families, communities, health care organizations, employers, health plans, and government agencies, including, of course, Medicare and Medicaid. Th ese costs include direct expenses associated with the provision of care to a sicker and more disadvantaged population as well as indirect costs such as lost productivity, lost wages, absenteeism, family leave to deal with avoidable illnesses, and lower quality of life. Premature death imposes signifi cant costs on society in the form of lower wages, lost tax revenues, additional services and benefi ts for families of the deceased, and lower quality of life for survivors. Th e direct and indirect costs of health inequalities to the economy have not been quantifi ed, but are likely to be substantial.

Annually, the United States spends over $2.2 trillion, or 16% of gross domestic product, on health care (Borger et al. 2006; Poisal et al. 2007). How much should society pay to eliminate health inequalities? Th e answer to this question depends on two factors: (1) what value does society place on equity, and (2) what cost does society bear by having health inequalities?

In this report we employ econometric analysis to estimate the direct medical costs and indirect costs to the economy of health inequalities. By doing so, we estimate the potential fi nancial benefi t that would accrue to the economy if every racial/ethnic group in the United States had similar health outcomes. • Eliminating health inequalities for minorities would have reduced indirect costs associated with illness and premature death by more than one trillion dollars between 2003 and 2006.