114 | International Journal of Consumer Studies, 25, 2, June 2001, pp114–122 © 2001 Blackwell Science Ltd Household out-of-pocket health care expenditure trends: 1980–95 Deanna L. Sharpe, 1 Jessie X. Fan 2 and Gong-Soog Hong 3 1 University of Missouri, MO, USA 2 University of Utah, UT, USA 3 Utah State University, UT, USA restraining costs through use of preventive care, pre- payment of most medical services and restricting the use of medical services. 2–4 The elderly and the poor can obtain basic health care through government funded Medicare and Medicaid respectively. 5,6 Tax and transfer payments essentially redistribute a portion of the health care financial burden from these groups to the general population. This redis- tribution implies that a social contract exists which says that those least able to help themselves as a result of advanced age, limited physical capacity or inadequate economic resources should receive help to meet a basic need. Escalating health care costs have begun to force reconsideration of the form and extent of this social contract, however. Provisions of the 1997 Balanced Budget Act were clearly intended to slow growth in public health care expenditures under Medicare and Medicaid. If accessible and affordable health care for a broad segment of the U.S. population is a public policy goal, assessing household out-of-pocket spending on health care is important for national health policy planning. This study uses 15 years of Consumer Expenditure Survey data to chart trends in constant dollar out- of-pocket dollar expenditures and household budget shares for health insurance, medical services, prescrip- tion drugs and medical supplies, taking eligibility for government health care programmes into considera- tion. Findings were used to draw policy implications regarding the effect of health care market changes and the allocation of the health care financial burden. Related literature The health economics literature suggests that the low price that consumers pay out-of-pocket after the in- surance company covers the larger share of the costs induces a higher demand for health care. 7 In support of this idea, Rubin and Koelln 8 found a significant and Abstract This descriptive study examines household out-of-pocket expenditure trends for health insurance, medical services, prescription drugs and medical supplies using the 1980–95 Consumer Expenditure Surveys. Constant dollar out-of- pocket expenditures for health insurance have risen sharply over time while constant dollar out-of-pocket expenditures for medical services have declined, perhaps reflecting health care market changes. Older consumers spent more in constant dollars and had higher budget shares for all aspects of health care than younger consumers. Although Medicare and Medicaid provide access to basic health care, results indicate that, for older consumers who are poor, health care expenditures may still crowd out spending for other necessities. Keywords Health care, out-of-pocket expenditures. Introduction Health care has become increasingly expensive in the United States. During the 1980s and 1990s, infla- tion-adjusted national health care expenditures grew between 5% and 6% a year. By the end of the 1990s, national health care expenditures exceeded 13% of U.S. Gross Domestic Product. Health care costs are pro- jected to increase at twice the rate of inflation over the next several years. 1 In response, private health insurance companies have passed on cost increases to consumers in the form of higher health insurance premiums, reduced reimbursements and tighter coverage restric- tions. Recently, the managed care approach to health care delivery has gained popularity as a means of Correspondence D.L. Sharpe, University of Missouri-Columbia, 239 Stanley Hall, Colum- bia, MO 65211, USA. E-mail SharpeD@missouri.edu