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Income Losses and Discretionary Health Care Spending: Findings for Single-Mother Families
Using two-year panel data from the Medical Expenditure Panel Survey (MEPS) for 2004 to 2012, we examine how health care spending by single-mother families responds to income changes. We focus on single-mother families since in earlier research, we found their health care spending to be particularly vulnerable to income losses. In particular, we focus on the family’s total out-of-pocket health care spending and its allocation among specific health care services, including office-based visits, prescription medication services, vision care, dental care, and mental health care.
We define family income relative to the federal poverty line (FPL), classifying families as poor/near poor (less than 125% of the FPL), low income (125% to less than 200% of the FPL), middle income (200% to less than 400% of the FPL), or high income (400% of the FPL or more). Using two-part health expenditure models with correlated random effects, we empirically estimate the impact of an income loss on out-of-pocket spending. We do so by examining shifts from higher to lower income categories experienced by single-mother families in our sample. We find several important results:
First, an income loss is associated with a decline in total out-of-pocket health care spending. For instance, depending on its magnitude, an income loss among middle-income families is associated with as much as $602 decline in the annual out-of-pocket spending.
Second, prioritization of health care spending for specific services differs for mothers and children. Specifically, dental and vision care services are prioritized for children but not for mothers. For instance, in middle-income and low-income families that experience an income loss and become poor, annual out-of-pocket spending on dental care for single mothers decreases by as much as $94 and increases for children by as much as $142.
Third, the services that families appear to consider to be more discretionary in nature for children are office-based visits and mental health spending. Income losses are associated with a decline in out-of-pocket spending for office-based visits for children by as much as $82. Spending toward children’s prescription medications is nearly unchanged. In contrast, out-of-pocket spending toward mother’s prescription medications decline by as much as $121 in middle-income families experiencing an income loss.
To summarize, our results indicate that single-mother families experiencing an income loss substantially decrease their out-of-pocket health care spending. In doing so, single mothers prioritize spending toward children’s health care over their own health care spending. Despite this, spending toward children’s office based visits and children’s mental health decline. Overall, our findings reveal that income loss is associated with both shifts in spending toward children and a decline in absolute spending.
