This report, Out of Pocket Healthcare 2011 focuses on those costs of health care which are not paid for by government or private insurance. Once a small percentage of costs of the health care system, the percentage borne by the consumer is increasing steadily.

1. Out of Pocket Healthcare Spending 2011
Published: April 2011
No. of Pages: 85
Price: $ 1995
The costs of health care products and services continue to rise briskly, significantly
outpacing currently low inflation rates. According to the U.S. Department of Labor, the
average household's spending on health care after inflation has been rising by about 1.4%
each year. Retirees have been particularly hard hit, with inflation-adjusted out-of-pocket
costs rising by more than 2% each year as a result of increased spending on prescription
drugs.
While insurance is the most common form of payment for healthcare services, increasingly
customers are paying for their own expenses. Pharmaceutical, device and diagnostic
companies, should recognize that a part of their revenues are originating directly or
indirectly from out of pocket expenditures. Unique financial services have been created to
facilitate non-insurance-paid health care services, and more are expected to be created in
the near term.
This report,Out of Pocket Healthcare Spending 2011 focuses on those costs of health
care which are not paid for by government or private insurance. Once a small percentage of
costs of the health care system, the percentage borne by the consumer is increasing
steadily. Included in the report is:
• Estimates of the Current 'Out of Pocket' Healthcare Spending Market and Forecasts to
2015.
• Breakdown of Spending by Type (Elective, Hospital, Emergency Room, Dental, Vision
Outpatient, Prescription Drugs, Office Based Visit, Other)
• Health Care Reform and Its Impact on Out of Pocket Spending
• Statistics For the Types of Consumers Most Likely to Pay Out of Pocket
• Drivers of the Out of Pocket Trend and Potential Limiters
• Overview of the U.S. Healthcare System, Insured and Uninsured Population.
• The Types of Services and Products Purchased with Out of Pocket dollars
• Overview of the growing Healthcare Finance market and a look at key competitors.

2. The economic recession of December 2007 to October 2009 represented a major downturn
that led to broad-based cost-cutting, rising unemployment and reduced disposable income.
The impact of the pullback - which some experts compared to the Great Depression of 1929
to 1934 - cannot be overstated. Kalorama Information looks at what change has resulted in
out of pocket expenditure for healthcare as a result of the recession and weak recovery.
As part of Kalorama Information's trusted process, secondary research from government,
medical and industry sources was utilized along with interviews with industry experts in the
healthcare finance industry.
In Weak Recovery, Consumers Bearing More of Healthcare Costs
Healthcare costs paid out-of-pocket by consumers have increased steadily in recent years,
but according to Kalorama Information, the recession and weak recovery are additional
drivers for the trend. In fact, the independent healthcare market research firm has found in
its new report, Out of Pocket Healthcare Spending 2011, that out-of-pocket healthcare
spending was $303 billion in 2010 and the rate of growth will accelerate at 8% annually in
the coming years.
According to the U.S. Department of Labor, the average household's inflation-adjusted
spending on healthcare has been rising by about 1.4% each year. Retirees have been
particularly hard hit, with inflation-adjusted out-of-pocket healthcare costs rising by more
than 2% each year as a result of increased spending on prescription drugs.
"The recent recession brought with it a high unemployment rate, exacerbated by increased
outsourcing of jobs to lower cost countries, broad-based cost-cutting and reduced
disposable income," said Bruce Carlson, publisher of Kalorama Information. "Meanwhile,
affordable healthcare has become less available but more necessary."
The costs of healthcare products and services continue to rise briskly; in some cases, they
have become astronomical. For example, in 2010, average annual healthcare premiums for
a family of four ($13,770) approached annual earnings at the federal minimum wage
($14,500). As a result, Kalorama notes that managed care organizations are increasingly
shifting the burden of healthcare costs to consumers by way of increased co-pays and
premiums.
About 70% of consumers' out-of-pocket healthcare spending goes to premiums. And this is
increasing as HMOs and employers engage in cost shifting. Co-pays make up a little over
3% of spending, which Kalorama also expects to increase due to cost shifting. Another 27%
of out-of-pocket spending goes to direct payments.
The Health Care Reform of 2010 has significantly changed the landscape of the U.S.
healthcare industry by extending healthcare coverage to approximately 32 million previously
uninsured people. Although this could potentially decrease some demand for out-of-pocket

3. spending from the previously uninsured, it may in fact, raise awareness of the value of basic
care and bring more persons into the medical system, thus potentially increasing spending
as newly insured consumers take a renewed interest in their health and wellness.
TABLE OF CONTENTS
CHAPTER ONE: EXECUTIVE SUMMARY
Health Care Reform
Impact of the Economy
Out of Pocket Cost Drivers
Healthcare Inflation
Cost Shifting
Retail Clinics
Out of Pocket Cost Limiters
Disease Management Programs
Part D
Generics
OTC Products
Where Out of Pocket Dollars are Spent
CHAPTER TWO: THE STATE OF OUT OF POCKET HEALTHCARE SPENDING IN 2011
Types of Expenditures
Insurance Co-Payments
Direct Payments
Premiums and Plan Fees
Cash or Check
Credit Cards
Loans and Lines of Credit
Flexible Spending Accounts
Health Savings Accounts
Medical Financing
Amount Financed
Non-Elective Procedures and Prescription Drugs
Distribution of Out-of-Pocket Spending on Non-Elective Procedures (Hospital, Emergency
Room, Dental, Vision Outpatient, Prescription Drugs, Office Based Visit, Other)
Consumers Who Pay Out of Pocket
The Uninsured and Underinsured
Medicaid Recipients
The Disabled
Senior Citizens
The Mentally Ill
The Obese
Persons with Chronic Conditions
Healthcare Finance Competitors
Reliance Medical Finance
PFS
Med Direct
MedChoice Financial

4. E-Financing Solutions
CSI Financial Services
Credit Medical
Care Credit
Capitol One Healthcare Finance
CHAPTER THREE: OUT-OF-POCKET EXPENDITURES FORECAST TO 2015
Out-of-pocket Expenditure Growth Drivers
Healthcare Inflation
Managed Care Cost Shifting
Retail Clinics
Out-of-Pocket Expenditure Growth Constraints
Disease Management Programs
Part D
Generic Drugs
Rx-to-OTC Switches
Forecasts
Expenditures by Type (Credit Card, Cash, Loans, Healthcare Financing Programs,HSA)
Payment Methods
Amount Financed
Consumers Who Pay Out-of-Pocket (Uninsured and Underinsured, Medicaid, Disabled,
Senior Citizens, Mentally Ill, Obese, Persons With Chronic Conditions.)
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