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More Americans, even the comfortably middle class, could soon find themselves in a similar position.

Melnick, of USC, says he expects the profile of the uninsured to change over the next few years to include more middle-class families with stable jobs. The most recent census data shows that 14% of those without insurance now make between $25,000 and $50,000 a year. A recent California HealthCare Foundation survey found 17% of Californians could not pay one or more medical bills in the last year.

At what cost?
To keep health coverage, more workers are cutting back on food, heat and other necessities. Still, many of them eventually will lose the battle.
By Daniel Costello
Times Staff Writer
April 4, 2005

Terri MATTHEWS, a teacher's aide in East Palo Alto, spends $613 a month for her family's health insurance   24% of her take-home pay. Rather than go without coverage, she skimps on other needs; her heat has been turned off twice in the last year and she recently had to drop her car insurance.

Peggy McPhee, a 52-year-old bridal dressmaker in Santa Rosa, spends more than a quarter of her salary on health insurance. She's recently given up her cellphone, buys clothing only at garage sales and no longer turns on her heat in the winter.

Ron Dybas, of Los Banos, chose to close his lumber company two months ago after 17 years in business. He says he took a job with a company that offers benefits after he no longer could afford to spend nearly a third of his income insuring his family.

Such sacrifices for health insurance are far from rare. As employees continue to absorb more of their healthcare costs, an increasing number of people   even healthy ones   are drastically altering their lives simply to hold on to their insurance. They are delaying homeownership, putting off saving for their children's education, or otherwise sacrificing their financial security to guard against a catastrophic medical bill.

Many people, especially lower- and middle-class workers and the chronically ill, are beginning to spend a once-unimaginable share of their income on health coverage. In some cases, health costs have become the single biggest expense in family budgets.

Between 2000 and 2004, the number of people spending more than 25% of their earnings on healthcare  — a figure normally associated with homeownership  — rose by nearly a fourth to 14.3 million people, according to Washington, D.C.-based Families USA, a healthcare advocacy group. Over the same period, according to the Kaiser Family Foundation, health premiums rose an average of 59%; federal data show the average employee's earnings rose 12.4%.

"Healthcare has always been expensive. But it's become more than that now," says Glenn Melnick, a Rand Corp. economist and a USC professor of healthcare finance. "How much of someone's income is too much to spend on healthcare? 10%? 30%?"

"More people are nearing a tipping point," says Mark Goldberg, senior vice president for policy at the National Coalition on Health Care, an organization of businesses, provider groups and pension funds that advocates for affordable healthcare. "Eventually, something has to give."

Like the house-rich, cash-poor who stretch their finances to pay for housing, those who are barely holding on to their coverage are increasingly known as the "insured poor." Eventually, many probably will lose the battle, joining the 45 million Americans without medical coverage.

The strain on employees and their families isn't likely to abate any time soon. Estimates are that health expenses will continue to increase three to four times as fast as salaries over the next several years. In California, costs are rising faster than in the rest of the country. In 2003, they jumped 15.8% compared with 13.9% nationally.

More employers also are capping the amount they spend on health costs, meaning they're no longer increasing what they contribute to an employee's plan. In that case, employees pay for all future rate increases. A small but growing number of companies, mostly smaller firms, have started dropping employee health insurance altogether.

Asking workers to pay more of their health bills is essential to reducing demand and lowering overall health costs, economists and policymakers say. But the increased cost-shifting is coming at the same time as a number of other financial pressures. The economy is stagnant. The stock market has been lackluster. And the prices of basic essentials such as real estate and gas are rising at startling clips.