www.ahrq.gov

Agency for Healthcare Research and Quality

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Health Care Expenses in the

Community Population, 1996

MEPS Chartbook No. 5

Medical Expenditure Panel Survey
Suggested citation:

Machlin SR, Cohen JW, Zuvekas SH, et al. Health care expenses in the community population, 1996. Rockville (MD):Agency for

Healthcare Research and Quality; 2001. MEPS Chartbook No. 5.AHRQ Pub. No. 01-0027.

The estimates in this report are based on the most recent data available from MEPS at the time the report was written. However, selected

elements of MEPS data may be revised on the basis of additional analyses, which could result in slightly different estimates from those shown

here. Please check the MEPS Web site for the most current file releases—

www.meps.ahrq.gov

MEPS Chartbook No. 5 by:

Steven R. Machlin, M.S.

Joel W. Cohen, Ph.D.

Samuel H. Zuvekas, Ph.D.

Joshua Thorpe, M.P.H.

Christopher T. Lee, M.P.H.
i

In 1996, the average expense per person

in the U.S. civilian noninstitutionalized

population (including people with no

expenses) was $2,038. The average for

people with an expense (about 85

percent of the population) was $2,389.

About half of all people had expenses of

less than $395 (the median value), while

the median for people with expenses

was $566. Median expenses were

substantially lower than average

expenses because a small percentage of

people incurred a disproportionately

large share of medical expenses.

Hospital inpatient stays made up the

largest share of national health care

expenses (38 percent) in 1996, followed

by ambulatory services from both

physician and nonphysician providers

(33 percent).

The vast majority of medical expenses

were paid for by third-party payers (82

percent in total), while 18 percent were

paid out of pocket by individuals and

families. Private insurance was the

largest third-party payer, covering 45

percent of total expenses.

Medical expenses varied substantially by

age in 1996, with average expenses per

person by far the highest among older

people ($5,370 for the population age 65

and over). Average expenses for adults

ages 18-64 were approximately double

those for children but only about onethird as large as for the elderly.

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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executive summary

Uninsured people under age 65 had

substantially lower per capita expenses

than their counterparts with private or

public insurance coverage.

The percent of health expenses paid out

of pocket was highest for children ages

6-17 years (28 percent) and lowest for

children under 6 (9 percent).

Among people under 65, the uninsured

paid for a higher share of their total

medical expenses out of pocket (43

percent) than people with private (20

percent) or public insurance (7 percent).

iii

1 Introduction

3 Sources of Data for This Report

5 Section 1

Overall Expenses

17 Section 2

Per Capita Expenses

23 Section 3

Expenses by Type of Service

31 Section 4

Out-of-Pocket Expenses

37 References

38 Definitions of Terms

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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contents

This chartbook presents data

from the Medical Expenditure Panel

Survey (MEPS) on spending in

1996 for medical services and

supplies for the civilian

noninstitutionalized (community)

population. This kind of detailed

information has not been available

since the data from the 1987

National Medical Expenditure

Survey were released in the early

1990s. Since that time, the health

care system in the United States has

undergone tremendous change,

making the need for updated

expense data critical.

Expenses refer to payments for

health care services. More

specifically, they are defined as the

sum of direct payments for care

provided during the year, including

out-of-pocket payments and

payments by private insurance,

Medicaid, Medicare, and other

sources. Payments for over-thecounter drugs, alternative care

services, and phone contacts with

medical providers are not included.

Indirect payments not related to

specific medical events, such as

Medicaid Disproportionate Share

and Medicare Direct Medical

Education subsidies, also are not

included.

The report is organized into

four sections. Section 1 shows

national expenses by amount, type

of service, and source of payment.

Sections 2-4 illustrate variation in

different aspects of health care

spending by selected population

characteristics (age, race/ethnicity,

income, insurance status, and health

status). Section 2 shows per capita

expenses, Section 3 shows the

distribution of expenses by type of

service, and Section 4 shows out-ofpocket expenses. See the section

“Definitions of Terms” for

information on the categories used

for type of service, source of

payment, and population

characteristics.

This chartbook and other

MEPS publications are available

electronically on the MEPS Web

site at

http://www.meps.ahrq.gov/

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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introduction

1

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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3

Sources of

Data for This

Report

The estimates presented in this

chartbook are drawn from the 1996

Medical Expenditure Panel Survey

(MEPS) Household Component.

MEPS is the third in a series of

medical expenditure surveys

conducted by the Agency for

Healthcare Research and Quality

(formerly the Agency for Health

Care Policy and Research). The

MEPS Household Component is a

nationally representative survey that

collects detailed information on

health status, health care use and

expenses, and health insurance

coverage of individuals and families

in the U.S. civilian noninstitutionalized (community)

population.

In some cases, totals may not

add precisely to 100 percent as a

consequence of rounding. Because

of small sample sizes, people

identified as American Indians,

Aleuts, Eskimos, or other races are

not included in comparisons by

race/ethnicity, although they are

included in the other charts. Only

differences that are statistically

significant at the 0.05 level are

discussed in the text.

The numbers shown in this

chartbook are primarily drawn from

MEPS public use file HC-012,

updated with public use file HC012S1. (See the MEPS Web site <http://www.meps.ahrq.gov/>.)

Additional and more detailed

information on 1996 expenditures

can be found in MEPS Research

Findings No. 12, 

“Health Care

Expenses in the United States,

1996.” The estimates presented

here differ slightly from

corresponding estimates in MEPS

Research Findings No. 12 because of

revisions made to the estimates for

prescribed medicines.

sources of data

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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5

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section 1

Overall

Expenses

The United States spends a

larger share of its Gross Domestic

Product on health care than any

other major industrialized country.

To understand health care spending

in the United States, it is necessary

to examine how payments are

distributed across types of services,

payment sources, and different

segments of the population. This

section presents summary statistics

on the amount, type, and sources of

health care spending for the U.S.

community population in 1996.
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• In 1996, 85 percent of the U.S.

civilian noninstitutionalized

population, about 229 million

people, had some type of medical

expense. The total payments

made for health care services and

supplies for this population were

about $548 billion.

• Of the 15 percent of the

population with no expenses, a

small proportion (approximately

5 percent of this group) received

some care for which no payments

were made.

Agency for Healthcare Research and Quality

6

Medical Expenditure Panel Survey

What proportion of the community population

had medical expenses and how much was paid?

14.7%

85.3%

Total = $548 billion

Expenses

No expenses
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• The MEPS estimate of national medical expenses for

1996 is substantially lower than the estimate from

the National Health Accounts (NHA) of the Health

Care Financing Administration (HCFA). However,

the NHA are more expansive than MEPS in the

scope of expenses included. The NHA also include

expenses for people who are not part of the civilian

noninstitutionalized population.

• AHRQ and HCFA staff have estimated that over 90

percent of the difference in expense estimates

between MEPS and the NHA (about $416 billion) is

attributable to the more extensive range of items and

broader population included in the NHA. The

remaining difference probably stems from

irreconcilable definition and measurement differences

between the two sources and statistical sampling

error associated with the estimates.

Agency for Healthcare Research and Quality

7

Medical Expenditure Panel Survey

How does the MEPS estimate of medical expenses

compare with the National Health Accounts?

Population and services not

in scope for MEPS

Population and services in

scope for MEPS

$0

$200

$400

$600

$800

$1,000

$1,200

$548 $588

$416

MEPS NHA

Billions
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• The average expense per person

in the U.S. community

population (including people

with no expenses) was about

$2,038. The average for people

with an expense (about 85

percent of the population) was

$2,389.

• About half of all people had

expenses of less than $395 (the

median value). The median for

people with expenses was $566.

• Median expenses were

substantially lower than average

expenses because a small

percentage of people incurred a

disproportionately large share of

medical expenses.

Agency for Healthcare Research and Quality

8

Medical Expenditure Panel Survey

What are the average annual medical

expenses per person?

$0

$500

$1,000

$1,500

$2,000

$2,500 Median

Average

$395

Total population Population with expenses

$2,038

$566

$2,389
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• Hospital inpatient stays have

declined substantially as a

proportion of total expenses over

the last two decades. However,

they still made up the largest

share of national health care

expenses (38 percent) in 1996,

followed by ambulatory services

from both physician and

nonphysician providers (33

percent).

• Purchases of prescription

medicines accounted for 12

percent of expenses in 1996,

about double the proportion in

1987.

• Dental visits, home health care,

and other medical services

accounted for the smallest

portions of national medical

expenses.

Agency for Healthcare Research and Quality

9

Medical Expenditure Panel Survey

How are medical expenses distributed by

type of service?

38.2%

11.9% Inpatient

Prescribed

medicines

7.9%

Dental

6.2%

Home

health

2.8%

Other

33.0%

Ambulatory
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• Hospital inpatient stays are by far

the most expensive type of

medical service. The average

expense per stay in 1996,

including payments for hospital

facility services and physician care

while in the hospital, was

$8,330. However, expenses for

about half of all stays were less

than $4,332 (the median value).

• Median expenses were $64 per

dental visit, $50 per ambulatory

visit to medical providers

(including both physicians and

other providers), and $23 per

prescribed medicine.

Agency for Healthcare Research and Quality

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Medical Expenditure Panel Survey

How do average payments vary

by medical service?

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Inpatient (per stay)

Ambulatory (per visit)

Medicines (per prescription)

Dental (per visit)

$8,330

$127

$35

$146

$4,332

$50

$23

$64

Average Median
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• The vast majority of medical

expenses were paid for by thirdparty payers (82 percent in

total), while 18 percent were

paid out of pocket by individuals

and families.

• Private insurance was the largest

third-party payer, covering 45

percent of total expenses.

• Medicare and Medicaid, the

largest government-sponsored

health insurance programs,

accounted for about 30 percent

of national medical expenses (21

percent and 9 percent,

respectively).

Agency for Healthcare Research and Quality

11

Medical Expenditure Panel Survey

How are medical expenses distributed

by source of payment?

44.6%

Private

insurance

21.3%

Medicare

17.7%

Out-ofpocket

8.6%

Medicaid

7.9%

Other
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• About half (52 percent) of all

ambulatory care expenses in

1996 were paid by private health

insurance. The proportion for

inpatient care was slightly lower

(47 percent).

• Private health insurance paid for

only 9 percent of home health

care, a substantially smaller

portion than for any other

service category.

• Private health insurance paid for

a relatively small portion of other

medical expenses (28 percent).

About half of all expenses in this

category were for glasses and

other visual aids, items that often

are not covered by private

insurance.

Agency for Healthcare Research and Quality

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Medical Expenditure Panel Survey

What portion of expenses does private health

insurance pay for different medical services?

0%

15%

30%

45%

60%

46.7%Inpatient

52.4%

40.0% 42.5%

8.8%

28.2%

Ambulatory

Prescription

medicines

Dental

Home

health

Other
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• In 1996, over half of medical

expenses for home health care

were covered by Medicare.

Medicare also paid for substantial

portions of inpatient care (32

percent) and ambulatory care

(16 percent).

• The portion of prescription

medicine and dental expenses

paid by Medicare was negligible

since Medicare typically does not

cover these services.

Agency for Healthcare Research and Quality

13

Medical Expenditure Panel Survey

What portion of expenses does Medicare

pay for different medical services?

0%

15%

30%

45%

60%

32.3%Inpatient

16.1%

1.5% 0.2%

52.6%

6.8%

Ambulatory

Prescription

medicines

Dental

Home

health

Other

Note: This chart covers expenses for people of all ages.
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• About half of the “other”

medical expense category, half of

dental expenses, and nearly half

of expenses for prescribed

medicines were paid out of

pocket. The portion paid out of

pocket was substantially lower for

the remaining service categories. 

• Out-of-pocket payments

comprised a negligible portion of

payments for inpatient care (2

percent) because private

insurance and Medicare covered

the vast majority of these

expenses.

Agency for Healthcare Research and Quality

14

Medical Expenditure Panel Survey

What portion of expenses is paid out of

pocket for different medical services?

0%

15%

30%

45%

60%

1.9%Inpatient

16.3%

44.4%

51.5%

12.1%

53.6%

Ambulatory

Prescription

medicines

Dental

Home

health

Other

Type of service
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• Among the civilian

noninstitutionalized population,

Medicaid paid proportionately

more of the expenses for home

health care (16 percent) than for

any other type of service.

• Medicaid covered expenses for

inpatient care and prescription

medicines in equal shares (about

10 percent each) and paid 7

percent or less of the expenses

for the other medical service

types.

Agency for Healthcare Research and Quality

15

Medical Expenditure Panel Survey

What portion of expenses does Medicaid

pay for different medical services?

0%

15%

30%

45%

60%

9.9%Inpatient

6.7%

10.0%

2.8%

16.2%

5.5%

Ambulatory

Prescription

medicines

Dental

Home

health

Other

Type of service

Per Capita

Expenses

Per capita expenses vary

according to characteristics of the

population such as age,

race/ethnicity, income, health

status, and type of insurance

coverage—factors that are examined

in this section. These characteristics

are associated with factors affecting

medical spending, including the

need for care, the likelihood that

people will seek care, access to care,

and prices charged for services. For

example, the need for care generally

increases with age and access to care

generally increases with the extent

of insurance coverage. Average per

capita estimates shown in this

section include people who either

used no services or used services for

which no payment was made.

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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section 2

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• In 1996, average medical

expenses per person were by far

the highest among the elderly

($5,370).

• Average expenses were somewhat

higher for children under age 6

than for children ages 6-17. This

difference mainly results from the

lower proportion of older

children with any medical

expenses (83 percent, as opposed

to 90 percent for children under

6).

• Average expenses for adults ages

18-64 were approximately

double those for children but

only about one-third as large as

for the elderly.

Agency for Healthcare Research and Quality

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Medical Expenditure Panel Survey

How do average medical expenses

per person vary by age?

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$1,052

Under 6

$757

$1,861

$5,370

6-17 18-64 65 and over
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• Average medical expenses per

person were substantially higher

for whites than for any other

racial/ethnic group. Blacks had

the second highest per capita

expenses.

• Per capita expenses were lowest

for Hispanics and Asian/Pacific

Islanders.

Agency for Healthcare Research and Quality

19

Medical Expenditure Panel Survey

How do average medical expenses per

person vary by race/ethnicity?

$0

$500

$1,000

$1,500

$2,000

$2,500 $2,281

White

$1,654

$1,221

$1,038

Black Hispanic Asian/Pacific

Islander
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• People under age 65 who were

uninsured throughout 1996 had

substantially lower per capita

expenses than their counterparts

with private or public insurance

coverage.

• Among the elderly, those with

Medicare but no supplemental

insurance coverage had the

lowest average expenses. Those

with Medicare and supplemental

public insurance coverage, the

elderly group in the poorest

health, had the highest per capita

expense

Agency for Healthcare Research and Quality

20

Medical Expenditure Panel Survey

How do average medical expenses per

person vary by insurance status?

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Any

private

$1,672 $1,963

$585

$4,249

Public

only

$5,486

$7,222

Uninsured Medicare

only

Medicare/

private

Medicare/

other public

Under 65 65 and over
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• Average expenses per person

were about 20 percent higher for

people in poor or near-poor

families than for others.

• The average expenses for people

in low-income families were

similar to those for people in

families with middle to high

income (about $2,000).

Agency for Healthcare Research and Quality

21

Medical Expenditure Panel Survey

How do average medical expenses per

person vary by poverty status?

$1,700

$1,800

$1,900

$2,000

$2,100

$2,200

$2,300

$2,400

Poor/

near poor

$2,342

Low income Middle/high

income

$2,020

$1,954

0
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• For both the elderly and nonelderly, average medical expenses

per person were substantially

higher for people in fair or poor

health than for those in better

health.

• Among people under 65 years of

age, average expenses were about

five times higher for those in fair

or poor health ($5,900,

compared with $1,144 for those

in better health). Among the

elderly, average expenses were

only about 21

/2 times greater for

those in fair or poor health

($9,541 vs. $3,590).

Agency for Healthcare Research and Quality

22

Medical Expenditure Panel Survey

How do average medical expenses per

person vary by perceived health status?

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

1.9%

Excellentgood

$1,144

$5,900

$3,590

$9,541

Fair or

poor

Excellentgood

Fair or

poor

Under 65 65 and over
Expenses by

Type of Service

The mix of services is an

important determinant of the total

cost of medical care in the United

States. For example, the proportion

of expenses accounted for by

inpatient hospital care (the most

expensive type) has fallen over the

last decade as insurers have

encouraged the substitution of

ambulatory for inpatient care.

Furthermore, expenses for

prescription medicines have

increased dramatically with the rapid

diffusion of new drugs in recent

years. In this section, variations in

the distribution of expenses by type

of service are examined by age,

race/ethnicity, income, insurance

status, and health status.

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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section 3

23
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• Children under 6 had the

highest proportion of medical

expenses for inpatient hospital

care (59 percent), followed by

elderly people (43 percent).

High inpatient expenses for

some infants and 1-year-olds

account for the high proportion

of inpatient expenses for young

children.

• The elderly had the smallest

proportion of expenses for

ambulatory care—only about 1

in 4 dollars spent (24 percent),

compared to 31 percent or

more in the other age groups.

• About 13 percent of medical

expenses for adults, but less than

9 percent of expenses for

children, were for prescribed

medicines.

Agency for Healthcare Research and Quality

24

Medical Expenditure Panel Survey

How does the distribution of expenses

vary by age?

Under 6 6-17

18-64 65 and over

59.3%

4.9%

4.8%

31.0%

8.3%

34.0%

20.0%

37.7%

12.7%

20.8%

42.8%

23.8%

13.5%

12.5% 35.8%

38.2%

Inpatient

Ambulatory

Prescription medicines

All other
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• About half of expenses for

blacks, compared to only about

one-fourth of expenses for

Asian/Pacific Islanders, were for

inpatient care. 

• Only one-fourth of health care

expenses for blacks, as opposed

to one-third of expenses for

other racial/ethnic groups, were

for ambulatory services. This

lower proportion for blacks

reflects their larger proportion

of expenses for inpatient care. 

• About 31 percent of expenses

for Asian/Pacific Islanders were

in the “all other” category of

medical expenses (largely dental

and home health services). This

proportion is about twice as

high as for the other

racial/ethnic groups.

Agency for Healthcare Research and Quality

25

Medical Expenditure Panel Survey

How does the distribution of expenses

vary by race/ethnicity?

White Black

Hispanic Asian/Pacific Islander

10.6%

16.0%

49.0%

24.3%

16.6%

12.3% 37.1%

34.0%

Inpatient

Ambulatory

Prescription medicines

All other

8.9%

31.3% 25.5%

34.3%

10.9%

15.7%

39.0%

34.4%
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• The share of spending that went

for inpatient care was higher for

people under 65 with public

health insurance coverage

(primarily Medicaid) than for

their privately insured or

uninsured counterparts. This

may be attributable to the fact

that people with public

insurance were more likely than

people with private insurance or

no coverage to be in poor

health.

• The proportion of total

expenses accounted for by

prescribed medicines for the

non-elderly did not vary

significantly by insurance status.

Agency for Healthcare Research and Quality

26

Medical Expenditure Panel Survey

How does the distribution of expenses for people

under 65 vary by type of insurance coverage?

Any private Public only

Uninsured

Inpatient

Ambulatory

Prescription medicines

All other

13.1%

12.6%

45.8%

28.5%

11.1%

15.2%

34.4%

39.3%

14.7%

16.1%

29.8%

39.4%
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• The elderly who had public

insurance (primarily Medicaid) in

addition to Medicare differed

from elderly people in the other

insurance categories in two main

ways:

— A much smaller proportion

of their expenses went for

inpatient care: only 29

percent, compared with 54

percent for those with

Medicare only and 43

percent for those with

Medicare and private

insurance.

— A larger share of their

expenses (44 percent) were

in the “all other” category.

The vast majority of these

expenses were for home

health care.

Agency for Healthcare Research and Quality

27

Medical Expenditure Panel Survey

How does the distribution of expenses for the

elderly vary by type of insurance coverage?

Medicare only Medicare and private

Medicare and other public

17.8%

12.8% 42.8%

26.6%

13.0%

14.0%

53.8%

19.3%

11.5%

43.6%

29.0%

15.9%

Inpatient

Ambulatory

Prescription medicines

All other
• About half of expenses for nonelderly people in fair or poor

health were for inpatient care,

compared to only about onequarter of expenses for their

healthier counterparts.

• The portion of expenses for

people under 65 that went for

prescription drugs was similar

regardless of health status. 

• The share of expenses for the

non-elderly in excellent or good

health that went for “all other”

services was about twice as large

as it was for their counterparts in

fair or poor health.

• For people under age 65, most

of the expenses in the “all other”

category for those in better

health were for dental care. In

contrast, only about one-quarter

of these expenses for people in

poorer health were for dental

care and about half were for

home health care.

How does the distribution of expenses for

people under 65 vary by perceived health status?

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Agency for Healthcare Research and Quality

28

Medical Expenditure Panel Survey

Excellent-good Fair or poor

Inpatient

Ambulatory

Prescription medicines

All other

8.7%

11.3%

52.4%

27.6%

12.0%

18.2%

26.3%

43.4%
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Agency for Healthcare Research and Quality

29

Medical Expenditure Panel Survey

• The distribution of expenses for

the elderly varied substantially by

health status. For example,

elderly people in excellent to

good health had higher

proportions of expenses for

ambulatory care (32 percent,

compared to 18 percent for

those in fair or poor health) and

for prescribed medicines (15

percent vs. 11 percent)

• The elderly in fair or poor health

had a higher proportion of

expenses for inpatient care than

those in better health (45 vs. 36

percent). However, this

differential by health status is

substantially smaller for the

elderly than for the non-elderly.

(See previous chart.)

• The share of expenses that went

for “all other” services was

higher for elderly people in fair

or poor health than for their

counterparts in better health (26

vs. 17 percent). For the elderly in

fair or poor health, most

expenses in the “all other”

category were for home health

services; only about half of

expenses in this category for the

elderly in excellent to good

health were for home health.

How does the distribution of expenses for

the elderly vary by perceived health status?

Excellent-good Fair or poor

Inpatient

Ambulatory

Prescription medicines

All other

25.7%

11.2%

45.4%

17.7%

15.2%

17.4%

35.6%

31.8%
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Agency for Healthcare Research and Quality

30

Medical Expenditure Panel Survey

• In 1996, the share of expenses

for inpatient care was highest for

people in the poorest families.

Only about one-third of medical

expenses for people in families

with middle to high income were

for inpatient care, compared to

about half of all expenses for

people in poor or near-poor

families.

• People in middle- to highincome families had the highest

proportion of expenses for

ambulatory services.

How does the distribution of expenses

vary by poverty status?

Poor/near poor Low income

Middle/high income

Inpatient

Ambulatory

Prescription medicines

All other

17.5%

12.4% 40.0%

30.1%

9.9%

16.8%

49.2%

24.1%

12.5%

16.8%

33.9%

36.8%
Out-of-Pocket

Expenses

Although insurance covers

much of the cost of medical care in

the United States, individuals and

families also contribute toward

payment of their medical bills.

These out-of-pocket payments are

often used as an indicator of the

burden of health expenses on

individuals and families. For

example, out-of-pocket expenses as

a proportion of income are a

reflection of the adequacy of health

insurance coverage. This section

describes variations in out-of-pocket

expenses for medical care and

services (not including health

insurance premiums) by age,

race/ethnicity, income, insurance

status, and health status.

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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section 4

31
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• The percent paid out of pocket

was highest for children ages 6-

17 (28 percent) and lowest for

children under age 6 (9 percent).

The high proportion of out-ofpocket expenses for children ages

6-17 can be attributed to large

expenses for orthodontia, most

of which is paid for out of

pocket.

• The low percent paid out of

pocket for young children

relative to other age groups is

associated with high inpatient

expenses for some infants and 1-

year-olds. (Out-of pocket

spending is generally less for

inpatient care than for other

types of services.)

• The share of expenses paid for

out of pocket was slightly higher

for adults ages 18-64 years (19

percent) than for the elderly (15

percent).

Agency for Healthcare Research and Quality

32

Medical Expenditure Panel Survey

How does out-of-pocket spending for

medical care vary by age?

0

10

20

30

1.9%

Under 6

9.4%

27.7%

18.7%

15.3%

6-17 18-64 65 and over

Percent of total expense
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• About 1 of every 5 dollars spent

on health care for whites and

Asian/Pacific Islanders in 1996

was paid out of pocket. 

• Blacks paid a lower percentage of

their medical expenses out of

pocket (11 percent) compared to

other racial/ethnic groups. This

lower proportion for blacks

reflects two factors:

– Inpatient care (only a small

share of which is paid out of

pocket) accounted for a

larger proportion of expenses

for blacks than for people in

the other racial/ethnic

groups.

– A relatively high proportion

of blacks were covered by

Medicaid, which requires less

out-of-pocket payment than

other types of insurance.

Agency for Healthcare Research and Quality

33

Medical Expenditure Panel Survey

How does out-of-pocket spending for

medical care vary by race/ethnicity?

0

10

20

30

1.9%

White

18.8%

10.6%

15.3%

20.9%

Black Hispanic Asian/Pacific

Islander

Percent of total expense
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• Uninsured people under age 65

had lower per capita expenses

than their insured counterparts.

(See Section 2.) However, the

uninsured paid for a higher share

of their total medical expenses

out of pocket (43 percent) than

people with private insurance

(20 percent) or public insurance

(7 percent).

• Although the uninsured paid a

high proportion of their expenses

out of pocket, other sources—

such as the Department of

Veterans Affairs, public clinics,

and other public and private

sources—paid for over half

(57 percent) of their medical

expenses.

• Out-of-pocket spending was

substantially lower for the elderly

with Medicare and other public

coverage (5 percent) than for

those with Medicare only

(20 percent) or Medicare and

additional private coverage

(16 percent).

Agency for Healthcare Research and Quality

34

Medical Expenditure Panel Survey

How does out-of-pocket spending for

medical care vary by insurance status?

0

20

40

60

1.9%

Any

private

19.5%

7.3%

43.2%

19.7%

Public

only

Percent of total expense

16.2%

5.3%

Uninsured Medicare

only

Medicare/

private

Medicare/

other public

Under 65 65 and over
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• The share of medical expenses in

1996 that was paid out of pocket

rose as family income increased. 

• About 1 out of every 5 dollars in

medical expenses for people in

middle- to high-income families

was paid out of pocket,

compared with only about 1 out

of every 9 dollars spent for

people in poor and near-poor

families.

Agency for Healthcare Research and Quality

35

Medical Expenditure Panel Survey

How does out-of-pocket spending for

medical care vary by poverty status?

0

10

20

30

1.9%

Poor/near poor

11.0%

16.3%

20.4%

Low income Middle/high income

Percent of total expense
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• For both the elderly and nonelderly, a smaller share of health

care expenses was paid out of

pocket for those in fair or poor

health than for those in better

health. This lower proportion

for people in poorer health

reflects:

– A high share of expenses for

inpatient care (only a small

portion of which is usually

paid out of pocket).

– Higher proportions with

Medicaid coverage, under

which only minimal out-ofpocket payments are usually

required.

Agency for Healthcare Research and Quality

36

Medical Expenditure Panel Survey

How does out-of-pocket spending for

medical care vary by perceived health status?

0

10

20

30

10.3%

Excellentgood

23.4%

18.8%

13.0%

Percent of total expense

Fair or

poor

Excellentgood

Fair or

poor

Under 65 65 and over
The MEPS data shown here are

based on public use data file

HC012, updated with HC012S1.

(See the MEPS Web site

<http://www.meps.ahrq.gov/>.)

The following references were also

used.

Cohen JW, Machlin SR, Zuvekas SH, et al.

Health care expenses in the United

States, 1996. Rockville (MD): Agency

for Healthcare Research and Quality;

2000. MEPS Research Findings No. 12.

AHRQ Pub. No. 01-0009.

Hahn B, Lefkowitz D. Annual expenses

and sources of payment for health care

services. Rockville (MD): Agency for

Health Care Policy and Research; 1992.

National Medical Expenditure Survey

Research Findings 14. AHCPR Pub.

No. 93-0007.

Selden TM, Levit KA, Cohen JW, et al.

Reconciling medical expenditure

estimates from the Medical Expenditure

Panel Survey and the National Health

Accounts, 1996. Unpublished report.

Agency for Healthcare Research and

Quality; 2001.

Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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references

37
Type of Service

For the charts in Section 1, expenses by type of

service are classified into six broad categories:

hospital inpatient, ambulatory, prescribed

medicines, dental, home health, and other. In

Section 3, dental and home health expenses are

combined with the “other” category, resulting in

four categories.

Hospital inpatient services—This category includes

room and board and all hospital diagnostic and

laboratory expenses associated with the basic

facility charge, payments for separately billed

physician inpatient services, and some emergency

room expenses incurred immediately prior to

inpatient stays. It excludes expenses for hospital

discharges that did not involve an overnight stay,

which are included as ambulatory expenses.

Ambulatory services—This category includes

expenses for visits to medical providers seen in

office-based settings or clinics, hospital outpatient

departments, emergency rooms (except some visits

resulting in an overnight hospital stay), and clinics

owned and operated by hospitals. It also includes

expenses for events reported as hospital admissions

without an overnight stay.

Prescribed medicines—This category includes

expenses for all prescribed medications that were

initially purchased or refilled during 1996, as well

as expenses for diabetic supplies (some of which

may have been purchased without a prescription). 

Dental services—This category covers expenses

from any type of dental care provider, including

general dentists, dental hygienists, dental

technicians, dental surgeons, orthodontists,

endodontists, and periodontists.

Home health services—This category includes

expenses for care provided by home health

agencies and independent home health providers.

Agency providers accounted for most (about 83

percent) of the expenses in this category.

Other—This category includes expenses for

eyeglasses, contact lenses, ambulance services,

orthopedic items, hearing devices, prostheses,

bathroom aids, medical equipment, disposable

supplies, and other miscellaneous items or services

that were obtained, purchased, or rented during

the year. About half the expenditures in this

category were for vision items.

Source of Payment

The estimates of sources of payment presented in

this chartbook represent the percent of total

expenses (summed across all persons) paid for by

each payment source. Sources of payment are

classified as follows.

Out-of-pocket by user or family.

Private insurance—This category includes

payments made by insurance plans covering

hospital and medical care (excluding payments

from Medicare, Medicaid, and other public

sources). Payments from Medigap plans or

CHAMPUS and CHAMPVA (Armed-Forcesrelated coverage) are included. Payments from

plans that provide coverage for a single service

only, such as dental or vision coverage, are not

included.

Medicare—Medicare is a federally financed health

insurance plan for the elderly, persons receiving

Social Security disability payments, and most

persons with end-stage renal disease. Medicare Part

A, which provides hospital insurance, is

automatically given to those who are eligible for

Social Security. Medicare Part B provides

supplementary medical insurance that pays for

medical expenses and can be purchased for a

monthly premium.

Medicaid—Medicaid is a means-tested government

program jointly financed by Federal and State

funds that provides health care to those who are

eligible. Program eligibility criteria vary

significantly by State, but the program is designed

to provide health coverage to families and

individuals who are unable to afford necessary

medical care.

Other sources—This category includes payments

from the Department of Veterans Affairs

(excluding CHAMPVA); other Federal sources

(Indian Health Service, military treatment facilities,

and other care provided by the Federal

Government); various State and local sources

(community and neighborhood clinics, State and

Medical Expenditure Panel Survey

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definitions of terms

Agency for Healthcare Research and Quality

38
Medical Expenditure Panel Survey Agency for Healthcare Research and Quality

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39

local health departments, and State programs other

than Medicaid); Medicaid payments reported for

people who were not enrolled in the Medicaid

program at any time during the year; Worker’s

Compensation; unclassified sources (automobile,

homeowner’s, or liability insurance, and other

miscellaneous or unknown sources); and any type of

private insurance payments reported for people

without private health insurance coverage during the

year.

Population Characteristics

In general, population characteristics are measured as

of December 31, 1996, or the last date that the

sample person was part of the civilian

noninstitutionalized population living in the United

States prior to December 31, 1996.

Race/Ethnicity

Classification by race and ethnicity is based on

information reported in MEPS for each family

member. Respondents were asked if the race of the

sample person was best described as American Indian,

Alaska Native, Asian or Pacific Islander, black, white,

or other. They also were asked if the sample person’s

main national origin or ancestry was Puerto Rican;

Cuban; Mexican, Mexicano, Mexican American, or

Chicano; other Latin American; or other Spanish. All

persons whose main national origin or ancestry was

reported in one of these Hispanic groups, regardless

of racial background, are classified as Hispanic. The

other race categories do not include Hispanic

persons.

Comparisons by race/ethnicity in this chartbook are

based on the following four race/ethnicity groups:

white, black, Hispanic, and Asian/Pacific Islander.

Because of small sample sizes, persons identified as

American Indians, Aleuts, Eskimos, or other races

(who constitute about 1 percent of the population)

are not included in charts showing race/ethnicity,

although they are included in all other charts.

Health Insurance Status

Individuals under age 65 were classified into the

following three insurance categories. 

Any private health insurance—Individuals with

insurance that provides coverage for hospital and

physician care at any time during the year, other than

Medicare, Medicaid, or other public

hospital/physician coverage, are classified as having

private insurance. Persons with Armed-Forces-related

coverage—CHAMPUS/CHAMPVA (currently called

TRICARE)—are also included because the number of

sample persons in this group is small and this type of

coverage is similar to private insurance. Insurance that

provides coverage for a single service only, such as

dental or vision, is not included.

Public coverage only—Individuals are considered to

have public coverage only if they met both of the

following criteria:

• They were not covered by private insurance at

any time during the year.

• They were covered by one of the following public

programs at any point during the year: Medicare,

Medicaid, or other public hospital/physician

coverage. 

Uninsured—The uninsured are defined as persons not

covered by Medicare, CHAMPUS/CHAMPVA,

Medicaid, other public hospital/physician programs,

or private hospital/physician insurance at any time

during 1996. Individuals covered only by

noncomprehensive State-specific programs (e.g.,

Maryland Kidney Disease Program, Colorado Child

Health Plan) or private single-service plans (e.g.,

coverage for dental or vision care only, coverage for

accidents or specific diseases) are not considered to be

insured.

Individuals age 65 and over were classified into the

following three insurance categories: 

Medicare only.

Medicare and private insurance.

Medicare and other public insurance.

Poverty Status

Each person was classified according to the total

1996 income of his or her family. Within a

household, all individuals related by blood, marriage,

or adoption were considered to be a family. Personal

income from all family members was summed to

create family income. Possible sources of income

included annual earnings from wages, salaries,

bonuses, tips, and commissions; business and farm

gains and losses; unemployment and Worker’s

Compensation; interest and dividends; alimony, child

support, and other private cash transfers; private

pensions, IRA withdrawals, Social Security, and

veterans’ payments; Supplemental Security Income

and cash welfare payments from public assistance, Aid

to Families with Dependent Children, and Aid to

Dependent Children; gains or losses from estates,

trusts, partnerships, S corporations, rent, and

royalties; and a small amount of other income.

Poverty status is the ratio of family income to the

1996 Federal poverty thresholds, which vary by

family size and age of the head of the family. The

categories are:

Poor and near poor—This refers to persons in families

with income less than or equal to 125 percent of the

poverty line and includes those who reported

negative income.

Low income—This category includes persons in

families with incomes over 125 percent through 200

percent of the poverty line.

Middle and high income—This category includes

persons in families with income over 200 percent of

the poverty line.

Perceived Health Status

The MEPS respondent was asked to rate the health of

each person in the family according to the following

categories: excellent, very good, good, fair, and poor.

For this report, the five health status categories were

collapsed into the following two broad categories:

excellent to good health and fair or poor health.
www.ahrq.gov

AHRQ Publication No. 01-0027

April 2001

ISBN 1-58763-030-3

ISSN 1531-5649