Health care accounted for 5.7% of consumer spending in 2005, but the average
share of spending was higher for people with lower income. As shown in Table 2,
for people in the lowest income quintile, health care accounted for 7.6% of spending
in 2005. for those in the second-lowest quintile, the share was 8.1%. the pattern
was similar for spending on health insurance. the average share of spending by all
consumers for insurance was 2.9%, compared with 4.1% for people in the bottom
two income quintiles. the 4.1% share for those in the two lowest quintiles was
almost double the share of spending for insurance by those in the highest income
group (2.1%).

Although the share of spending on health care is generally higher for lower-income
people, it is not highest for those in the lowest-income quintile. instead, it
is highest for those in the second-lowest quintile. this result can be explained in part
by Medicaid coverage and other public benefits for people with very low income. the shares of spending in Table 2 are averages. Within income groups,
health care and health insurance may account for a lower or higher share of spending
for individuals and their families.

Higher-income consumers spend more money on health care than lower-income
consumers, even though health care accounts for a smaller share of their spending.
In 2005, consumers in the highest income quintile spent $3,962 on health care, 2.7
times as much as consumers in the lowest quintile, who spent $1,448 (see Table 2).
Because the average number of people per consumer unit is higher for consumers
with higher income, the 2.7 ratio overstates the real difference in spending.
Adjusting for the number of people per consumer unit, in 2005, consumers in the
highest income quintile spent $1,238 per person on health care, 1.5 times as much as
consumers in the lowest quintile, who spent $852. Spending amounts were similar
in the middle income quintiles.

Looking at subcategories of health care spending, higher-income consumers
spent more than lower-income consumers on both health insurance and other heath
care (medical services, medical supplies, and drugs). in 2005, consumers in the
highest income quintile spent $601 per person on health insurance, 1.3 times as much
as those in the lowest quintile, who spent $459. the ratio was 1.6 for spending in the
other health care subcategory, with consumers in the highest income quintile
spending $637, compared with $393 for those in the lowest quintile. Differences in
average spending per person are difficult to interpret without additional information
on consumers’ access to employer-sponsored insurance, government benefits, and
medical products and services.

Table 2. Consumer Spending on Health Care and Health Insurance, by Income Quintile, 2005

Source: CRS analysis based on data from the U.S. Bureau of Labor Statistics, “Table 1. Quintiles of income before taxes: Average annual expenditures and characteristics, Consumer Expenditure Survey, 2005.”

Notes: Components may not sum to totals because of rounding. Unless otherwise indicated, spending amounts and shares are for “consumer units.”

How Insurance Works: Consumer Spending on Health Care, by Income